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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 1997
REGISTRATION NO. -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACCELGRAPHICS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER)
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CALIFORNIA 3670 77-0388689
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1942 ZANKER ROAD, SAN JOSE, CALIFORNIA 95112 (408) 441-1556
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
JEFFREY W. DUNN
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACCELGRAPHICS, INC.
1942 ZANKER ROAD
SAN JOSE, CALIFORNIA 95112
(408) 441-1556
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:
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MICHAEL W. HALL JOHN W. CAMPBELL
EDMUND S. RUFFIN, JR. TAMARA POWELL TATE
AMY L. CUSTALOW DAVID LORIE
MARIBETH YOUNGER MORRISON & FOERSTER LLP
VENTURE LAW GROUP, A PROFESSIONAL CORPORATION 425 MARKET STREET
2800 SAND HILL ROAD SAN FRANCISCO, CALIFORNIA 94105
MENLO PARK, CALIFORNIA 94025 (415) 268-7000
(415) 854-4488
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED MAXIMUM
DOLLAR AMOUNT MAXIMUM OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE
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Common Stock.............................. $35,880,000 $12.00 $35,880,000 $10,872.73
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(1) Dollar amount to be registered consists of 2,990,000 shares of Common Stock
at $12.00 per share.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Dated , 1997
2,600,000 Shares
LOGO
Common Stock
------------------------------
Of the 2,600,000 shares of Common Stock offered hereby, 2,145,000 shares
are being issued and sold by AccelGraphics, Inc. ("AccelGraphics" or the
"Company") and 455,000 shares are being sold by certain selling stockholders
(the "Selling Stockholders"). See "Principal and Selling Stockholders." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Application has been made to have the Common Stock
approved for quotation on the Nasdaq National Market under the symbol "ACCL." It
is currently estimated that the initial public offering price will be between
$10.00 and $12.00 per share. See "Underwriting" for information relating to the
determination of the initial public offering price.
------------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to Proceeds to Selling
Public Discount (1) Company (2) Stockholders (2)
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Per Share.................. $ $ $ $
Total (3).................. $ $ $ $
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses, estimated at $750,000, payable by the Company.
(3) The Company and the Selling Stockholders have granted the Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 390,000 additional shares of Common Stock at the Price to
Public less the Underwriting Discount to cover over-allotments, if any. If
all such additional shares are purchased, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
----------------------------------
The Common Stock is offered by the several Underwriters named herein when,
as and if received and accepted by them, subject to their right to reject orders
in whole or in part and subject to certain other conditions. It is expected that
delivery of certificates for such shares will be made at the offices of Cowen &
Company, New York, New York, on or about , 1997.
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY
SOUNDVIEW FINANCIAL GROUP, INC.
, 1997
<PAGE> 3
[PICTURE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The AccelGraphics logo, AccelGraphics(R), AccelVIEW(R) and AG300(R) are
registered trademarks of the Company. The AccelGraphics design(TM),
AccelSTAR(TM), AG500(TM) and Flying Carpet(TM) are trademarks of the Company.
This Prospectus also contains the trademarks of other companies.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Except as set forth in the Consolidated
Financial Statements or as otherwise noted, all information in this Prospectus
(i) assumes a one-for-two reverse stock split of the Common Stock and Preferred
Stock to be effected prior to this offering, (ii) assumes the conversion of all
outstanding shares of Preferred Stock into Common Stock upon the closing of this
offering, (iii) reflects the reincorporation of the Company from California to
Delaware prior to the closing of this offering and (iv) assumes no exercise of
the Underwriters' over-allotment option. See "Description of Capital Stock" and
"Underwriting."
THE COMPANY
AccelGraphics, Inc. ("AccelGraphics" or the "Company") is a leading
provider of high-performance, cost-effective, 3-dimensional ("3D") graphics
subsystems, software accelerators and application utility software products for
the professional Windows NT and Windows 95 markets. The Company pioneered the
development of professional 3D graphics subsystems for use with Microsoft's
Windows NT operating system ("NT"). A 3D graphics subsystem integrates graphics
acceleration chip(s), specialized hardware, firmware, software and memory. The
Company's 3D graphics subsystems, when included in an Intel Pentium, Pentium Pro
or Digital Alpha-based computer, create a new class of computer system called a
"Personal Workstation." Personal Workstations, which often sell for less than
$10,000, provide capabilities and performance comparable to more expensive 3D
graphics RISC/UNIX workstations. In January 1995, AccelGraphics shipped what the
Company believes was the first 3D graphics subsystem for NT and currently offers
three distinct 3D graphics subsystem product lines.
3D computing is a highly effective way to realistically and intuitively
visualize, analyze, animate and communicate data. Engineers, designers,
scientists and researchers who previously used 2-dimensional ("2D") technology
now can work faster and more efficiently by using 3D technology to create,
modify and complete more sophisticated models. 3D computing is inherently
complex and computationally demanding, requiring up to or greater than half a
billion calculations per second. Since the 1980s, professionals have primarily
used RISC/UNIX workstations for 3D computing. However, RISC/UNIX workstation
vendors have developed proprietary operating systems, processors, buses,
application programming interfaces ("APIs") and 3D graphics subsystems,
resulting in expensive systems which are often difficult to integrate into
corporate computing networks.
In contrast to RISC/UNIX workstations, 3D capabilities of the personal
computer ("PC") have been extremely limited due to restrictions of PC operating
systems and the lack of sufficient microprocessor power, application software
and high-performance standard 3D APIs. Several technological innovations,
including Intel's Pentium and Pentium Pro processors and PCI bus architecture,
Microsoft's NT operating system and the introduction of OpenGL, a
high-performance 3D graphics API, have overcome many of these limitations.
However, to perform fully functional, high-performance 3D computing, an NT-based
integrated 3D graphics subsystem is required. Dataquest predicts that by 1999,
NT will operate nearly six times the number of workstations as RISC/UNIX.
The Company's products include a family of 3D graphics subsystems for
applications based on OpenGL and other 3D APIs, such as Autodesk's Heidi.
Through the Company's extensive experience in 3D algorithms, the interaction of
3D applications with OpenGL and overall 3D graphics system integration,
AccelGraphics delivers robust, well-integrated subsystem solutions to the
professional 3D graphics market. According to IDC, the unit volume of 3D
graphics subsystems enabling workstations will grow at a compounded annual
growth rate of 106% from 36,000 units in 1996 to over 650,000 units in the year
2000.
The Company sells its products through original equipment manufacturers
("OEMs") and a worldwide network of value added resellers ("VARs") and
distributors. The Company sells fully integrated 3D graphics subsystems to
Digital Equipment Corporation, Epson Direct, Hewlett-Packard Company, Hitachi,
Ltd., Samsung Electronics Co., Ltd. and Tri-Star Computer Corporation for use in
high-performance Personal Workstations. The Company also has technical
relationships with Intel Corporation and Microsoft
Corporation, as well as with key component suppliers including 3Dlabs, Inc.,
Cirrus Logic, Inc. and Texas Instruments, Inc. To enhance the performance of
applications which use the Company's 3D graphics subsystems, AccelGraphics has
developed relationships, some of which include joint engineering projects, with
many leading independent software vendors ("ISVs") such as Autodesk, Inc. and
Autodesk Inc.'s Kinetix division, Computer Associates International, Inc.,
Electronic Data Systems Corporation's Unigraphics division, Matra Datavision
S.A., Microsoft Corporation's Softimage, Parametric Technology Corporation,
Ricoh Corporation, Structural Dynamics Research Corporation and Visible
Decisions, Inc.
The Company was incorporated in April 1994 in the State of California and
commenced operations in late 1994. The Company will be reincorporated in
Delaware in March 1997. The Company's principal executive offices are located at
1942 Zanker Road, San Jose, California 95112. Its telephone number is (408)
441-1556.
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THE OFFERING
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Common Stock offered:
By the Company................................. 2,145,000 shares
By the Selling Stockholders.................... 455,000 shares
Common Stock to be outstanding after the
offering....................................... 7,906,307 shares(1)
Use of proceeds.................................. General corporate purposes including
payment of certain indebtedness, working
capital, capital expenditures, research
and development and potential acquisitions
of businesses and technologies. See "Use
of Proceeds."
Nasdaq National Market symbol.................... ACCL
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------- YEAR ENDED
JUNE DECEMBER 31,
MAR. 31, 30, SEPT. 30, DEC. 31, -------------------
1996 1996 1996 1996 1995 1996
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<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 2,371 $3,067 $ 4,260 $ 8,973 $ 3,911 $ 18,671
Gross profit......................................... 901 1,052 1,401 3,240 1,410 6,594
Income (loss) from operations........................ (532) (589) (578) 864 (4,401) (835)
Net income (loss).................................... $ (560) $ (595) $ (598) $ 821 $ (4,465) $ (932)
Pro forma net loss per share (2)..................... $ (0.15)
Shares used to compute pro forma net loss per share
(2)................................................ 6,272
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
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PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 2,979 $ 2,979 $ 22,424
Working capital.................................................... 5,030 5,030 24,475
Total assets....................................................... 8,439 8,439 27,884
Long term obligations.............................................. 1,782 1,782 34
Mandatorily redeemable convertible preferred stock................. 8,930 -- --
Total stockholders' equity (deficit)............................... (5,170) 3,760 24,953
</TABLE>
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(1) Excludes 63,250 shares of Common Stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $2.36 per share and
1,006,867 shares of Common Stock issuable upon exercise of outstanding
options at a weighted average exercise price of $1.30 per share at December
31, 1996. See "Management -- Stock Option and Incentive Plans."
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma net loss per
share.
(3) Reflects the conversion of all outstanding shares of Redeemable Convertible
Preferred Stock into 4,508,657 shares of Common Stock upon the closing of
this offering.
(4) Adjusted to reflect the receipt of estimated net proceeds from the sale by
the Company shares of Common Stock offered hereby at an assumed initial
public offering price of $11.00 per share and the payment of approximately
$1,748,000 of indebtedness to Kubota Corporation. See "Use of Proceeds" and
"Capitalization."
4
<PAGE> 6
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth below and elsewhere in this Prospectus.
LIMITED HISTORY OF PROFITABILITY AND UNCERTAINTY OF FUTURE FINANCIAL RESULTS
The Company has incurred a net operating loss in each year since commencing
operations in late 1994. As a result, the Company had an accumulated deficit as
of December 31, 1996 of approximately $5.5 million. The Company has only one
quarter of profitability, which may not be indicative of future operating
results, and the Company does not believe that current revenue growth rates are
sustainable. To date, the Company has earned substantially all of its revenues
from sales of its AG300/500, AccelPRO and AccelPRO TX hardware product lines.
There can be no assurance that the Company will ever achieve profitability on an
annual basis in the future or that it can sustain profitability on a quarterly
basis. The Company has completed only slightly more than two years of operations
and is subject to the risks inherent in the operation of a new business, such as
the difficulties and delays often encountered in the development and production
of new, complex technologies. There can be no assurance that the Company will be
able to address these risks.
The Company expects to expand its research and development, sales and
marketing and administrative capabilities. The anticipated increase in the
Company's operating expenses caused by this expansion could have a material
adverse effect on the Company's operating results if revenues do not increase at
an equal or greater rate. Also, the Company's expenses for these and other
activities are based in significant part on its expectations regarding future
revenues and are fixed to a large extent in the short term. Accordingly, the
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall, which would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SIGNIFICANT VARIABILITY IN QUARTERLY RESULTS
The Company's quarterly operating results have varied significantly in the
past and are likely to vary significantly in the future. The Company's quarterly
results are affected by a wide variety of factors including the gain or loss of
significant customers, size and timing of individual orders, timely introduction
and market acceptance of new products offered by the Company and its
competitors, availability, reliability and cost of components, the Company's
success in negotiating OEM and other customer agreements, customer order
deferrals in anticipation of new products, technological changes in operating
systems or applications, variations in manufacturing quality or capacities,
changes in the pricing policies of the Company or its competitors, changes in
demand for 3D graphics functionality, changes in the mix of revenues from
products having differing gross margins, changes in sales channel mix, changes
in average sales prices, warranty expenses, fluctuations in the Company's
expense levels, the Company's success at expanding its direct sales force and
indirect distribution channels, risks related to international operations,
extraordinary events such as litigation or acquisitions and general industry and
economic conditions, as well as other factors. Any of the above risks could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Quarterly revenues and operating results depend primarily on the volume,
timing and shipment of orders during the quarter, which are difficult to
forecast because customers generally place their orders on an as-needed basis
and, accordingly, the Company has historically operated with a relatively small
backlog. The Company's third party distribution channels provide the Company
with limited information regarding the quantity of the Company's products in the
sales channel. This reduces the Company's ability to predict fluctuations in
revenues resulting from a surplus or a shortage in its distribution channel and
could contribute to volatility in the Company's results of operations and cash
flows. A surplus of inventory in the distribution channel could unexpectedly
cause a reduction in product shipments and revenues. Moreover, a disproportion-
5
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ate percentage of the Company's revenues in any quarter may be generated in the
last month of a quarter. As a result, a shortfall in revenues in any quarter as
compared to expectations may not be identifiable until near the end of the
quarter. The Company may experience relatively weak demand in third quarters due
to historically weak summer sales in Europe.
The Company's gross margins are impacted by the sales channel mix, mix of
products sold, increased competition and related decreases in unit average
selling prices, introduction of new products, availability, reliability and cost
of components from the Company's subcontractors and suppliers, and general
economic conditions. Currently, the Company is focusing on increasing its sales
to OEMs, which have historically yielded lower margins than other channels.
Individual product lines generally provide higher margins at the beginning of
the life cycle and lower margins as the product line matures. In addition, the
Company's markets are characterized by rapidly changing technology and declining
average selling prices. Accordingly, the Company's gross margins may decline
from the levels experienced to date, which could have an adverse effect on the
Company's business, financial condition and results of operations.
A significant portion of the Company's operating expenses are relatively
fixed in the short term and planned expenditures are based on revenue forecasts.
As a result, if revenues are below levels needed to offset these operating
expenses, the Company's business, financial condition and results of operations
may be disproportionately affected because only a portion of the Company's
expenses vary with revenue. The Company generally must plan production, order
components and undertake its development, sales and marketing activities several
months in advance of shipping product and recognizing revenues. Accordingly, any
shortfall in revenues in a given quarter may impact the Company's operating
results and cash balances in a magnified way due to the Company's inability to
adjust expenses or inventory during the quarter to match the level of revenues
for the quarter. In addition, in the event the Company's customers desire to
purchase products in excess of forecasted amounts, the Company may not have
sufficient inventory or access to sufficient manufacturing capacity to meet such
demands. Although the Company has experienced growth in revenues in recent
quarters, there can be no assurance that the Company will sustain such revenue
growth or be profitable on an operating basis in any future period. For the
foregoing reasons, the Company believes that period-to-period comparisons of its
results are not necessarily meaningful and should not be relied upon as
indications of future performance. Further, it is likely that in some future
quarter the Company's revenues or operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Common Stock could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RAPID TECHNOLOGICAL CHANGE
The computer industry in general, and the markets for the Company's
products in particular, are characterized by ongoing technological developments,
evolving industry standards and rapid changes in customer requirements. Customer
preferences can change rapidly and new technology can quickly render existing
products obsolete. In order to keep pace with this rapidly changing market
environment, the Company must continually develop and incorporate into its
products technological advances and new features desired by customers at
competitive prices. There can be no assurance that the Company will be
successful in developing and marketing, on a timely basis or at all, competitive
products, product enhancements and new products that respond to technological
changes or changes in customer requirements and industry standards, or that the
Company's enhanced or new products will adequately address the changing needs of
the marketplace. Additionally, APIs have evolved and changed over time. Although
OpenGL has developed into a leading industry standard API for professional 3D
graphics development, it is likely that industry standards will continue to
evolve to meet rapidly changing customer requirements. There can be no assurance
that the Company will be successful in developing and marketing product
enhancements or new products that respond to these evolving standards. Failure
by the Company to respond effectively to changes in the 3D graphics market, to
develop or acquire new technology or to successfully conform to industry
standards would have a material adverse effect on the business, financial
condition and results of operations of the Company. In addition, the Company
strives to achieve compatibility between the Company's products and 3D graphics
applications the Company believes are or will become popular and widely adopted.
The Company invests
6
<PAGE> 8
substantial resources in development efforts aimed at achieving such
compatibility. Any failure by the Company to anticipate or respond adequately to
changes in applications could result in a loss of competitiveness and could
adversely affect the Company's business, financial condition and results of
operations. See " -- Dependence on ISV Relationships" and "Business -- Research
and Development."
SHORT PRODUCT LIFE CYCLES
The market for the Company's products is characterized by frequent new
product introductions and rapid product obsolescence. The life cycles of the
Company's products are difficult to estimate. The Company must constantly
monitor industry trends and select new technologies and features for its
products, as well as monitor the timing of introduction of new products.
Moreover, short product life cycles, coupled with single-source supply of
components used in the Company's products, may prevent the Company from being
able, in a timely manner, to reduce its procurement commitments, production or
inventory levels in response to obsolescence, unexpected shortfalls in orders,
revenues or declines in prices or, conversely, to increase production in
response to unexpected increases in demand. Failure to respond to the market
adequately could have a material adverse effect on the Company's business,
financial condition and results of operations. The timing of the end of a
product's life cycle is difficult to predict and is typically characterized by
steep declines in unit sales, pricing and margins. As new products are planned
and introduced, the Company may not be able to control the inventory levels of
older products and phase out production, potentially resulting in excess
inventory and the expenses associated therewith. The Company could experience
unexpected reductions in revenues from older generation products as customers
anticipate new products. To the extent the Company is unsuccessful in managing
product transitions, its business, financial condition and results of operations
would be adversely affected. See "Business -- Research and Development."
RELIANCE ON THIRD PARTY DISTRIBUTION
The Company relies on OEMs, VARs and a network of distributors for both
domestic and international revenues. In particular, sales to Digital Equipment
Corporation ("Digital") and Hewlett-Packard Company ("HP") accounted for
approximately 28% and 23% of 1996 revenues, respectively, and sales to NeTpower,
Inc. ("NeTpower"), a former customer, accounted for approximately 17% of the
Company's revenues in 1995. The Company believes that its future success may
depend upon its ability to broaden its customer base. There can be no assurance
that a major customer will not reduce, delay or eliminate its purchases from the
Company, which could have a material adverse effect on the Company's business,
financial condition and results of operations. Further, HP has a non-exclusive
manufacturing license in the event of the Company's bankruptcy, receivership or
failure to supply HP with specified quantities of products due to a cause not
associated with the negligence of either party. Digital has a non-exclusive
manufacturing license in the event that the Company is unable to supply Digital
with specified quantities of products. The Company's customer agreements are
short term and automatically renew each year and generally may be canceled for
convenience upon written notice by either party. There are no minimum purchase
requirements for the Company's OEMs, VARs and distributors. Some of the
Company's OEMs, VARs and distributors offer competitive products manufactured
internally or by third parties. There can be no assurance that the Company's
OEMs, VARs and distributors will give a priority to the marketing of the
Company's products as compared to competing products or alternative solutions or
that such OEMs, VARs and distributors will continue to offer the Company's
products. Moreover, there can be no assurance that the Company will continue to
sell substantial quantities of its products to these OEMs, VARs and
distributors, or that upon any termination of the Company's relationships with
any of these OEMs, VARs or distributors, the Company would be able to obtain
suitable alternate distributions channels. The loss of one or more of the
Company's OEMs, VARs or distributors could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Customers, Sales and Marketing."
Although the Company seeks information from end users who purchase the
Company's products from OEMs, VARs and distributors, the Company generally does
not sell directly to end users and cannot directly observe their experience with
the Company's products. The Company also does not have direct control over
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<PAGE> 9
the marketing and support efforts of its OEMs, VARs and distributors. This may
result in the inability of the Company to identify potential opportunities with
these customers and may cause a potential delay by the Company in the
recognition and correction of any problems with such OEM, VAR or distributor
sales or support organizations. Failure of the Company to respond to customer
preferences or experience with its products or the failure of OEMs, VARs or
distributors to market and support the Company's products successfully, could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Customers, Sales
and Marketing."
DEPENDENCE ON SUBCONTRACTORS AND SOLE-SOURCE SUPPLIERS
The Company relies on subcontractors to manufacture, subassemble, test and
ship the Company's products. The Company relies on sole-source suppliers for
certain critical components, such as 3Dlabs, Inc. ("3Dlabs") for its graphics
acceleration chips and Nan Ya PCB Service Co. ("Nan Ya") for its printed circuit
boards. In addition, there is a limited availability of certain application
specific integrated circuit chipsets that provide VRAM and DRAM memory. The
Company procures its components and products through purchase orders and does
not have specific requirement agreements with any of its subcontractors or
suppliers. Each of the Company's subcontractors and suppliers can cease
supplying the services, products or components at any time with no penalty. In
the event it becomes necessary for the Company to replace a key subcontractor or
supplier, the Company could incur significant manufacturing set-up costs and
delays while new sources are located and alternate components are integrated
into the design of the Company's products. There can be no assurance that the
Company will be able to maintain its current subcontractor and supplier
relationships or that the Company will be able to find suitable replacement
subcontractors and suppliers, if necessary. Although the Company maintains
ongoing efforts to obtain required quantities of products, component shortages
may exist from time to time, and there can be no assurance that the Company's
current subcontractors and suppliers will continue to provide sufficient
quantities of suitable quality product components at acceptable prices. The
inability of the Company to obtain product components at their historical cost
levels would directly affect the cost of the Company's products. In addition,
the Company's ability to respond to greater than anticipated market demand may
be constrained by availability of services, products or components. Further, one
of the Company's subcontractors is located in Hong Kong. When Hong Kong
transitions to the authority of the Peoples' Republic of China, the Company
could experience disruption in the supply of products from that subcontractor.
The loss of subcontractors or suppliers or the failure of subcontractors or
suppliers to meet the Company's price, quality, quantity and delivery
requirements would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Products" and
"-- Manufacturing."
DIFFICULTIES IN MANAGING GROWTH
The Company has experienced significant growth in its business over the
past two years which has placed demands on the Company's operational and
financial personnel and systems, outside manufacturing capacity, research and
development, technical support and other resources. The Company is expanding its
sales and marketing organizations, developing its distribution channels to
penetrate different and broader markets, funding additional research and
development and increasing its support organization to accommodate its growing
customer base. With continued growth, the Company may find it necessary to
enhance existing and implement new financial and management information systems
and controls and train its personnel to effectively operate such systems. Any
delay in the implementation of or any disruptions in the transition to such new
and enhanced systems and controls and personnel training could adversely affect
the Company's ability to accurately forecast sales demand and adjust third party
manufacturing to such demand, adjust purchasing levels, accurately record and
control inventory levels and record and report financial and management
information on a timely and accurate basis. Inaccuracy in demand forecasts in
the environment in which the Company operates can quickly result in either
insufficient or excess inventory and disproportional overhead expenses. Certain
of the Company's officers have recently joined the Company, including the
Company's Vice President of Engineering, and the Company anticipates further
significant increases in the number of employees. The Company plans to expand
the geographic scope of its customer base and
8
<PAGE> 10
operations. Failure to manage these changes and to expand effectively any of
these areas would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Manufacturing."
DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN HIGHLY SKILLED PERSONNEL
The success of the Company depends to a large extent upon its ability to
continue to attract and retain highly skilled personnel. Competition for
employees in the high technology sector in general, and in the graphics industry
in particular, is intense, and there can be no assurance that the Company will
be able to attract and retain sufficient numbers of qualified employees. The
Company has recently experienced a significant expansion in the overall level of
its business and the scope of its operations, including research and
development, marketing, sales, technical support and administration. It may
become increasingly difficult to hire, train and assimilate the new employees
needed given the market conditions. The Company has not entered into employment
agreements with any of its key personnel. Additionally, the Company has not
required its key personnel to enter into noncompetition agreements with the
Company. The Company's inability to retain, attract and assimilate certain
members of the executive management team or key employees would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Employees," "Management -- Executive Officers and
Directors" and "-- Executive Compensation."
COMPETITION
The market for 3D graphics accelerators is extremely competitive and
subject to rapid change. The Company expects competition to increase in the
future from existing competitors and from new market entrants with products that
may be less costly than the Company's products or provide better performance or
additional features not currently provided by the Company. The Company competes
with the following three major groups: professional 3D graphics board companies
(including Intergraph Corporation and Dynamic Pictures, Inc.), RISC/UNIX
workstation companies (including Sun Microsystems, Inc. ("Sun") and Silicon
Graphics, Inc. ("SGI")) and traditional volume PC board suppliers (including
ELSA GmbH, Diamond Multimedia Systems, Inc. and Matrox Electronic Systems Ltd.).
A variety of potential actions by any of the Company's competitors could have a
material adverse effect on the Company's business, financial condition and
results of operations. Such actions may include reduction of product prices,
increased promotion, announcement or accelerated introduction of new or enhanced
products, product giveaways, product bundling or other competitive actions.
Many of the companies that currently compete with the Company or that may
compete with the Company have longer operating histories and significantly
greater financial, technical, sales, marketing and other resources, as well as
greater name recognition and larger customer bases, than the Company. As a
result, these competitors may be able to respond more quickly and effectively to
new or emerging technologies and changes in customer requirements or to devote
greater resources to the development, promotion, sale and support of their
products than the Company. Consequently, the Company expects to continue to
experience increased competition, which could result in significant price
reductions, loss of market share and lack of acceptance of new products, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will be able to compete against current or future competitors successfully or
that competitive pressures faced by the Company will not have a material adverse
effect upon its business, financial condition and results of operations.
RISK OF MIGRATION TO THE MOTHERBOARD
The Company's 3D graphics subsystems function with Personal Workstations to
provide additional 3D and 2D graphics performance and functionality. As
technology becomes more widely utilized, it may become economically feasible to
incorporate certain 3D graphics capabilities onto PC motherboards or into
microprocessors. The Company recognizes that migration could occur with respect
to the functionality
9
<PAGE> 11
provided by the Company's current products. The Company's success is largely
dependent on its ability to continue to develop products which incorporate
higher performance technologies and additional functionality which system
manufacturers have not yet fully incorporated into PC motherboards or
microprocessors. While the Company believes that a market will continue to exist
for add-in subsystems that provide additional performance and advanced
functionality and that offer flexibility in systems configuration, there can be
no assurance that the incorporation of certain 3D and 2D capabilities onto PC
motherboards or microprocessors will not adversely affect the market for the
Company's products and consequently, the Company's business, financial and
results of operations could be materially adversely affected.
DEPENDENCE ON ISV RELATIONSHIPS
The Company's business strategy includes developing strategic relationships
with major ISVs that serve the 3D graphics market, including Autodesk, Inc.
("Autodesk") and Autodesk's Kinetix division ("Kinetix"), Computer Associates
International, Inc., Electronic Data Systems Corporation's ("EDS") Unigraphics
division, Matra Datavision S.A., Microsoft Corporation's ("Microsoft")
Softimage, Parametric Technology Corporation ("PTC"), Ricoh Corporation,
Structural Dynamics Research Corporation ("SDRC") and Visible Decisions, Inc.
The Company has devoted substantial engineering and management resources to
developing relationships with its ISV partners. If any of the Company's current
or future ISV partners were to cease supporting the Company's products, such
action could have a material adverse effect on the Company's business, financial
condition and results of operations. Further, there can be no assurance that the
Company will be able to successfully sustain its relationships or enter into new
relationships with major ISVs on terms acceptable to the Company or at all. See
"Business -- Strategic Relationships."
UNCERTAINTY REGARDING DEVELOPMENT OF 3D GRAPHICS MARKET
The 3D graphics market on NT workstations has recently begun to develop and
is rapidly evolving. The Company's future financial performance will depend in
large part on the continued growth of this market and the demand for 3D graphics
for professional 3D applications. The failure of the 3D graphics market to
achieve anticipated growth levels or a substantial change in 3D graphics
customer preferences would have a material adverse effect on the Company's
business, financial condition and results of operations. Additionally, demand
for the Company's products is also dependent upon the widespread development of
3D graphics applications by ISVs, the success of the Company's customers in
effectively developing a market for the Company's products and the willingness
of end users to pay for enhanced 3D capabilities on NT workstations. The
Company's products currently are designed for use on NT and/or Windows 95
workstations. In the event that end users, and particularly businesses, delay
their adoption of or fail to adopt NT or Windows 95, the market for the
Company's products would be diminished and the Company's business, financial
condition and results of operations could be materially adversely affected.
LIMITED HISTORY OF PRODUCT DEVELOPMENT
The Company's products are complex, are based on relatively new technology
and have a limited history of reliability. Companies engaged in the development
and production of new, complex technologies and products often encounter
difficulties in performance and reliability and delays in product introduction
and volume shipments. There can be no assurance that the Company will be
successful in resolving any problems with the Company's existing or future
products. Failure by the Company to resolve manufacturing or operational
problems with any existing product or any new product in a timely manner would
have a material adverse effect on the Company's business, financial condition
and results of operations.
The success of the Company will likely depend on its ability to develop and
market new products that provide superior performance at competitive prices. Any
quality, reliability or performance problems with such products, regardless of
materiality, or any other actual or perceived problems with the Company's
products, could have a material adverse effect on market acceptance of such
products and the Company's reputation. There can be no assurance that such
problems or perceived problems will not arise or that, even in the absence of
such problems, the Company's products will receive market acceptance. A failure
of the Company's products to receive market acceptance for any reason would have
a material adverse effect on the Company's
10
<PAGE> 12
business, financial condition and results of operations. In addition, the
announcement by the Company of new products and technologies could cause
customers to defer purchases of the Company's existing products, which would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Products," "-- Manufacturing" and
" -- Competition."
SOFTWARE DEFECTS
The Company is continuing to upgrade and improve features of AccelVIEW 3D,
Flying Carpet and software incorporated into its hardware products. The
Company's software products, and its hardware products incorporating any
software, are extremely complex as a result of such factors as advanced
functionality, the diverse operating environments in which they may be deployed,
the need for interoperability and the multiple versions of such products that
must be supported for diverse operating platforms, languages and standards.
These products may contain undetected errors or failures when first introduced
or as new versions are released. There can be no assurance that, despite testing
by the Company and by current and potential customers, errors will not be found
in new products after commencement of commercial shipments, resulting in loss of
or delay in market acceptance. Such loss or delay would likely have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Products."
INTERNATIONAL REVENUES
The Company's international revenues accounted for approximately 22% and
31% of the Company's 1995 and 1996 revenues, respectively, and primarily
consisted of sales to third party distributors based in the United Kingdom and
Germany. However, the Company believes that products sold to its European
distributors are resold throughout Europe. The Company expects that
international revenues will continue to account for a significant portion of its
total revenues in future periods. International revenues are subject to certain
inherent risks, including unexpected changes in regulatory requirements and
tariffs, government controls, political instability, longer payment cycles,
difficulties in collecting accounts receivable, difficulties in staffing and
managing foreign operations and potentially adverse tax consequences. The
Company's inability to obtain foreign regulatory approvals on a timely basis
could have a material adverse effect on the Company's business, financial
condition and results of operations. Fluctuations in currency exchange rates
could cause the Company's products to become relatively more expensive to end
users in a particular country, leading to a reduction in sales in that country.
The impact of future exchange rate fluctuations cannot be predicted adequately.
To date, the Company has not found it appropriate to hedge the risks associated
with fluctuations in exchange rates, as substantially all of the Company's
foreign sales have been denominated in U.S. dollars. However, if future
transactions are denominated in foreign currencies, the Company may undertake
hedge transactions. There can be no assurance that any hedging techniques
implemented by the Company would be successful or that the Company's results of
operations would not be materially adversely affected by exchange rate
fluctuations. In general, certain seasonal factors and patterns impact the level
of business activities at different times in different regions of the world. For
example, sales in Europe are adversely affected in the third quarter of each
year as many customers and end users reduce their business activities during the
summer months. These seasonal factors and currency fluctuation risks could have
a material adverse effect on the Company's business, financial condition and
results of operations. Further, because the Company operates in different
countries, the Company's management must address differences in regulatory
environments and cultures. Failure to address these differences successfully
could be disruptive to the Company's operations and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Customers, Sales and Marketing."
RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY
Although the Company has three patent applications filed in the United
States, these claims are not related to the Company's current product lines.
Instead, the Company relies exclusively on trade secret and copyright protection
for its proprietary technology. Despite the Company's precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company's
technologies without authorization or to
11
<PAGE> 13
develop competing technologies independently. Furthermore, the laws of certain
countries in which the Company does business, including countries in which the
Company does a significant amount of business, such as the United Kingdom and
Germany, may not protect the Company's software and intellectual property rights
to the same extent as the laws of the United States. There can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
technology. If unauthorized copying or misuse of the Company's products were to
occur to any substantial degree, or if a competitor of the Company were to
effectively duplicate the Company's proprietary technology, the Company's
business, financial condition and results of operations would be materially
adversely affected. Furthermore, while the Company requires employees and
consultants to enter into confidentiality agreements, there can be no assurance
that proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its trade secrets.
Certain technology used by the Company's products is licensed from third
parties, generally on a non-exclusive basis. The termination of any such
license, or the failure of any third party licensor to adequently maintain or
update its product, could result in delay in the Company's ability to ship its
products while it seeks to implement technology offered by alternative sources,
if any. Any required replacement licenses could prove to be either unavailable
or costly.
Although the Company has not received notices from third parties alleging
infringement claims that the Company believes would have a material adverse
effect on the Company's business, there can be no assurance that third parties
will not claim that the Company's current or future products or manufacturing
processes infringe the proprietary rights of others. Any such claim, with or
without merit, could result in costly litigation or might require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, or at all, which could have a material adverse effect upon the
Company's business, financial condition and results of operations.
FUTURE CAPITAL REQUIREMENTS
The Company's future capital requirements will depend upon many factors,
including the development of new products, the success of the Company's research
and development efforts, the expansion of the Company's sales and marketing
efforts and the status of competitive products. The Company believes that the
net proceeds of this offering and funds available under its existing bank line
of credit will be adequate to fund its operations for at least 12 months
following the offering. There can be no assurance, however, that the Company
will not require additional financing during such time. Further, there can be no
assurance that any additional financing will be available to the Company on
acceptable terms, if at all. If additional funds are raised by issuing equity
securities, further dilution to the existing stockholders could result. The
inability to obtain acceptable financing would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS
The Company currently has no specific use planned for a significant portion
of the proceeds of the Common Stock being issued and sold by it in the offering
other than the payment of certain indebtedness to Kubota Corporation. As a
consequence, the Company's management will have discretion to allocate a large
percentage of these proceeds to uses which the stockholders may not deem
desirable, and there can be no assurance that the proceeds can or will yield a
return. See "Use of Proceeds."
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of this offering, the Company's directors and officers and
their affiliates will beneficially own approximately 52% of the outstanding
Common Stock. As a result, these stockholders will be able to exercise
significant influence over all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
Such concentration of ownership may have the effect of delaying or preventing a
change in control of the Company. See "Principal and Selling Stockholders."
12
<PAGE> 14
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; BENEFITS TO EXISTING
STOCKHOLDERS
There has been no public market for the Common Stock prior to this offering, and
there can be no assurance that an active trading market will develop or be
sustained after this offering. The initial public offering price will be
determined through negotiations among the Company, the representatives of the
Underwriters and the selling stockholders. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. The negotiated public offering price may not be indicative of the market
price for the Common Stock following this offering. In recent years, the stock
market in general, and the stock prices of technology companies in particular,
have experienced extreme price fluctuations, sometimes without regard to the
operating performance of particular companies. Factors such as quarterly
variations in actual or anticipated operating results, changes in earnings
estimates by analysts, market conditions in the industry, announcements by
competitors, regulatory actions and general economic conditions may have a
significant effect on the market price of the Common Stock. Following
fluctuations in the market price of a corporation's securities, securities class
action litigation has often resulted. There can be no assurance that such
litigation will not occur in the future with respect to the Company. Such
litigation could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
consummation of this offering will result in the creation of a public market for
the Company's Common Stock that will permit secondary sales by existing
stockholders and allow them to realize any unrealized gain on their shares of
Common Stock. See "Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is expected to be substantially higher
than the book value per share of Common Stock. At an estimated offering price of
$11.00 per share, investors purchasing shares of Common Stock in this offering
will incur immediate and substantial dilution of $7.84 in the pro forma net
tangible book value per share of Common Stock in this offering and will have
paid approximately 72% of the total consideration paid for all shares of Common
Stock outstanding. After this offering, such investors will only own
approximately 33% of the Company's outstanding Common Stock. To the extent
outstanding options and warrants to purchase the Company's Common Stock are
exercised, there will be further dilution to new stockholders. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
7,906,307 shares of Common Stock, assuming no issuance of any shares nor
exercise of any outstanding stock options or warrants after December 31, 1996.
On the date of this Prospectus, the 2,600,000 shares of Common Stock offered
hereby (assuming no exercise of the Underwriters' over-allotment option) will be
immediately eligible for sale in the public market. An additional 4,106,767
shares of Common Stock (including approximately 353,811 shares issuable upon
exercise of vested options) will be eligible for sale beginning 181 days after
the date of this Prospectus, unless earlier released, in whole or in part, by
Cowen & Company. In addition, at various times beginning 181 days after the date
of this Prospectus, an additional 1,591,932 shares will become eligible for sale
in the public market upon expiration of their respective two-year holding
periods, subject to certain volume and resale restrictions as set forth in Rule
144 under the Securities Act. Certain stockholders holding 4,177,708 shares of
Common Stock (assuming exercise of outstanding warrants for 63,250 shares of
Common Stock) are entitled to registration rights with respect to their shares
of Common Stock. If such stockholders, by exercising their demand registration
rights, cause a significant number of securities to be registered and sold in
the public market, such sales could have an adverse effect on the market price
of the Company's Common Stock. The Securities and Exchange Commission has
proposed to reduce the Rule 144 holding periods. If enacted, such modification
will have a material effect on the timing of when shares of Common Stock become
eligible for resale. Sales of significant amounts of such shares in the public
market after this offering, or the prospect of such sales, could adversely
affect the market price of the Common Stock. Such sales also might make it more
difficult for the Company to sell equity securities or equity-related securities
in the future at a
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<PAGE> 15
time and price that the Company deems appropriate. See "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Underwriting."
BLANK CHECK PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue up to 2,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock may have the
effect of delaying, deterring or preventing a change of control of the Company
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of Common Stock. The Company has no current
plans to issue shares of Preferred Stock. The Company's Certificate of
Incorporation and Bylaws provide for, among other things, the prospective
elimination of cumulative voting with respect to the election of directors, the
elimination of actions to be taken by written consent of the Company's
stockholders and certain procedures such as advance notice procedures with
regard to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors. In addition, the Company's
charter documents provide that the Company's Board of Directors be divided into
three classes, each of which serves for a three-year term. The foregoing
provisions could have the effect of making it more difficult for a third party
to effect a change in the control of the Board of Directors. In addition, these
provisions could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, or of
making the Company less attractive to a potential acquiror of a majority of the
outstanding voting stock of the Company, and may complicate or discourage a
takeover of the Company. The foregoing provisions may also result in the
Company's stockholders receiving less consideration for their shares than might
otherwise be available in the event of a takeover attempt of the Company. See
"Description of Capital Stock."
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<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,145,000 shares
offered by the Company are estimated to be approximately $21,193,000
($23,904,000 if the Underwriters' over-allotment option is exercised in full) at
an assumed initial public offering price of $11.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses.
Currently, the Company plans to use approximately $1,748,000 of the net proceeds
to pay indebtedness to Kubota Corporation pursuant to a Subordinated Promissory
Note dated June 20, 1995, which indebtedness bears interest per annum at the
prime rate of interest as reported in The Wall Street Journal and is due and
payable on June 20, 1998. The Company intends to use the remaining net proceeds
from this offering for general corporate purposes, including working capital,
capital expenditures and research and development. A portion of the proceeds may
also be used to acquire or invest in complementary businesses or products, to
obtain the right to use complementary technologies and to acquire or expand
distribution channels. From time to time, the Company evaluates potential
acquisitions of such businesses, products or technologies. However, the Company
has no present understandings, commitments or agreements with respect to any
material acquisition of other businesses, products or technologies.
Pending use of the net proceeds for the above purposes, the Company intends
to invest such funds in short-term, interest-bearing, investment-grade
obligations. The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends in the foreseeable future.
In addition, the Company's existing bank line of credit currently prohibits the
payment of cash dividends on its capital stock without the bank's consent.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 (i) on an actual basis, (ii) pro forma giving effect to the
conversion of all outstanding Preferred Stock of the Company into Common Stock
upon the closing of this offering and the changes in the number of authorized
shares of Common and Preferred Stock (all of which will occur in connection with
the sale of Common Stock offered hereby), and (iii) pro forma, as adjusted to
give effect to the sale by the Company of the shares of Common Stock offered
hereby at an assumed initial public offering price of $11.00 per share and the
application of the estimated net proceeds therefrom. This table should be read
in conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations.......................................... $ 1,782 $ 1,782 $ 34
-------- -------- ---------
Mandatorily redeemable convertible preferred stock, $0.001 par
value:
Series A, 3,477,000 shares designated; 3,446,997 shares
issued and outstanding actual; no shares issued and
outstanding, pro forma and as adjusted.................... 5,745 -- --
Series B, 1,100,000 shares designated; 1,061,660 shares
issued and outstanding actual; no shares issued and
outstanding, pro forma and as adjusted.................... 3,185 -- --
-------- -------- ---------
8,930 -- --
-------- -------- ---------
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value; 10,000,000 shares
authorized actual; 2,000,000 shares authorized, pro forma
and as adjusted........................................... -- -- --
Common Stock, $0.001 par value; 50,000,000 shares authorized;
1,252,650 shares issued and outstanding actual, 5,761,307
shares issued and outstanding pro forma, 7,906,307 shares
issued and outstanding as adjusted (1).................... 1 6 8
Additional paid-in capital................................... 785 9,710 30,901
Notes receivable from stockholders........................... (89) (89) (89)
Deferred stock compensation.................................. (396) (396) (396)
Cumulative translation adjustment............................ (5) (5) (5)
Accumulated deficit.......................................... (5,466) (5,466) (5,466)
-------- -------- ---------
Total stockholders' equity (deficit)...................... (5,170) 3,760 24,953
-------- -------- ---------
Total capitalization.................................... $ 5,542 $ 5,542 $24,987
======== ======== =========
</TABLE>
- ---------------
(1) Excludes 63,250 shares of Common Stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $2.36 per share, 1,006,867
shares of Common Stock issuable upon exercise of outstanding options at a
weighted average exercise price of $1.30 per share and 1,909,536 shares
available for future issuance under the 1995 Stock Plan. See
"Management -- Stock Option and Incentive Plans," "Description of Capital
Stock" and Note 7 of Notes to Consolidated Financial Statements.
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<PAGE> 18
DILUTION
The pro forma net tangible book value of the Company at December 31, 1996
was approximately $3.8 million, or $0.65 per share of Common Stock. Pro forma
net tangible book value per share represents the amount of pro forma total
tangible assets, less the amount of pro forma total liabilities, divided by the
pro forma number of shares of Common Stock outstanding. After giving effect to
the sale by the Company of the 2,145,000 shares of Common Stock offered hereby
at an assumed price of $11.00 per share, the Company's pro forma net tangible
book value as of December 31, 1996 would have been $25.0 million, or $3.16 per
share. This represents an immediate increase in pro forma net tangible book
value of $2.51 per share to existing stockholders and an immediate dilution in
pro forma net tangible book value of $7.84 per share to new investors purchasing
shares in the offering. The following table illustrates the dilution and pro
forma net tangible book value per share to new investors as of December 31,
1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $11.00
Pro forma net tangible book value per share prior to this offering........ $0.65
Increase per share attributable to new investors.......................... 2.51
------
Pro forma net tangible book value per share after this offering............. 3.16
-------
Dilution to new investors................................................... $ 7.84
=======
</TABLE>
The following table sets forth, on a pro forma basis, as of December 31,
1996, the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by (i) existing
stockholders and (ii) new investors at an assumed offering price of $11.00 per
share (before deducting estimated underwriting discounts and commissions and
offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).................... 5,761,307 72.9% $ 8,945,000 27.5% $ 1.55
New investors(1)............................ 2,145,000 27.1 23,595,000 72.5 11.00
--------- ----- ----------- -----
Total.................................. 7,906,307 100.0% $32,540,000 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 5,306,307 shares or approximately
67.1% of the total shares of Common Stock outstanding after this offering
and will increase the number of shares held by new investors to 2,600,000
shares or approximately 32.9% of the total shares of Common Stock
outstanding after the offering.
The foregoing computations assume no exercise of the Underwriters'
over-allotment option, outstanding warrants or outstanding options after
December 31, 1996. As of December 31, 1996, there were outstanding warrants to
purchase 63,250 shares of Common Stock at a weighted average exercise price of
$2.36 per share, and outstanding options to purchase 1,006,867 shares of Common
Stock, at a weighted average exercise price of $1.30 per share. To the extent
these warrants and options are exercised, there will be further dilution to new
investors. See "Capitalization," "Management -- Stock Option and Incentive
Plans," "Description of Capital Stock" and Note 7 of Notes to Consolidated
Financial Statements.
17
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus. The consolidated statement of
operations data for the years ended December 31, 1995 and 1996, and the
consolidated balance sheet data as of December 31, 1995 and 1996 are derived
from consolidated financial statements of the Company that have been audited by
Price Waterhouse LLP, independent accountants, and are included elsewhere in
this Prospectus. The historical results are not necessarily indicative of the
results to be expected for any future period. The Company operates and reports
on a fiscal year ending on the Friday nearest December 31. For convenience,
fiscal years are shown in this Prospectus as ending on December 31.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues........................................................... $ 3,911 $18,671
Cost of revenues................................................... 2,501 12,077
------- -------
Gross profit....................................................... 1,410 6,594
------- -------
Operating expenses:
Research and development........................................ 2,618 2,663
Sales and marketing............................................. 2,154 3,635
General and administrative...................................... 1,039 1,131
------- -------
Total operating expenses................................... 5,811 7,429
------- -------
Loss from operations............................................... (4,401) (835)
Interest expense................................................... (183) (145)
Other income, net.................................................. 119 48
------- -------
Net loss........................................................... $(4,465) $ (932)
======= =======
Pro forma net loss per share(1).................................... $ (0.15)
=======
Shares used to compute pro forma net loss per share(1)............. 6,272
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 1,373 $ 2,979
Working capital.................................................... 2,530 5,030
Total assets....................................................... 3,951 8,439
Long term obligations.............................................. 1,748 1,782
Mandatorily redeemable convertible preferred stock................. 5,745 8,930
Total stockholders' deficit........................................ (4,528) (5,170)
</TABLE>
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma net loss per
share.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
AccelGraphics, Inc. designs, develops and markets high-performance,
cost-effective, 3D graphics subsystems, software accelerators and application
utility software products for the professional Windows NT and Windows 95
markets. The Company commenced operations in late 1994. In December 1994, the
Company purchased from Kubota Graphics, Inc. ("Kubota Graphics"), a subsidiary
of Kubota Corporation ("Kubota"), certain inventory and intangible assets
related to 3D graphics products, as well as certain property and equipment for
$1.2 million, a price which the Company believes represents Kubota Graphics'
lower of cost or market value. The Company used a portion of the proceeds from a
$3.3 million subordinated convertible note payable to Kubota to pay the purchase
price for such assets.
The Company introduced its first line of 3D graphics subsystems, the
AG300/500 product line, in January 1995. In mid 1996, the Company introduced its
AccelPRO and AccelPRO TX product lines, which are replacing the AG300/500
product line. To date, sales of the AG300/500, AccelPRO and AccelPRO TX product
lines have accounted for substantially all of the Company's revenues.
The Company's customers include OEMs, VARs and distributors. Revenues from
product sales are generally recognized upon shipment less an allowance for
estimated future returns and exchanges. The Company's gross margin has varied
with the mix of revenues by sales channels. OEM revenues generally yield lower
gross margins.
The Company expects to expand its research and development, sales and
marketing and administrative capabilities. The anticipated increase in the
Company's operating expenses caused by this expansion could have a material
adverse effect on the Company's operating results if revenues do not increase at
an equal or greater rate. Also, the Company's expenses for these and other
activities are based in significant part on its expectations regarding future
revenues and are fixed to a large extent in the short term. Accordingly, the
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall, which would have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the early stages of development, particularly
companies in new and rapidly evolving markets. To address these risks, the
Company must, among other things, respond to competitive developments, attract,
retain and motivate qualified persons, continue to upgrade its technologies and
commercialize its products. There can be no assurance that the Company will be
successful in addressing these and other risks.
Although the Company has experienced significant revenue growth since its
inception, particularly in its most recent quarter, the Company does not believe
that such growth rates are sustainable. Past revenue growth rates may not be
indicative of future revenue growth, if any, or future operating results. The
Company first attained quarterly profitability in the fourth quarter of 1996.
There can be no assurance that the Company will sustain profitability on a
quarterly basis or will achieve profitability on an annual basis. The Company's
limited operating history makes the prediction of future operating results
difficult, if not impossible. See "Risk Factors -- Limited History of
Profitability and Uncertainty of Future Financial Results" and "-- Significant
Variability in Quarterly Results."
19
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth selected items of the Company's consolidated
statements of operations as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1996
------ -----
<S> <C> <C>
Revenues.................................................................... 100.0% 100.0%
Cost of revenues............................................................ 63.9 64.7
------ -----
Gross profit................................................................ 36.1 35.3
------ -----
Operating expenses:
Research and development.................................................. 66.9 14.3
Sales and marketing....................................................... 55.1 19.5
General and administrative................................................ 26.6 6.0
------ -----
Total operating expenses............................................... 148.6 39.8
------ -----
Loss from operations........................................................ (112.5) (4.5)
Interest expense............................................................ (4.7) (0.8)
Other income, net........................................................... 3.0 0.3
------ -----
Net loss.................................................................... (114.2)% (5.0)%
====== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1995 AND 1996
Revenues
Revenues increased 377% from $3.9 million in 1995 to $18.7 million in 1996.
The increase was primarily due to increased unit sales of the Company's
AG300/500 product line as well as revenues from sales of its AccelPRO and
AccelPRO TX product lines following their introductions in mid 1996.
Revenues from product sales are generally recognized upon product shipment,
less an allowance for estimated future returns and exchanges. Provisions for the
costs of technical support services for the Company's hardware products and
estimated future warranty claims are recorded as a cost of revenues upon
recognition of related revenues.
International revenues increased 582% from $850,000 in 1995 to $5.8 million
in 1996, representing 21.7% and 31.0%, respectively, of revenues. The increase
in international revenues is primarily a result of an increase in sales of the
Company's products in Europe and, to a lesser extent, in the Pacific Rim.
Revenues from the Company's international customers are generally denominated in
United States dollars. Although the effects of currency fluctuations have been
insignificant to date, there can be no assurance that such fluctuations will not
be significant in the future. See "Risk Factors -- International Revenues."
Revenues from the Company's former customer, NeTpower, accounted for 16.6%
of revenues in 1995. Revenues from Digital and HP accounted for 27.9% and 22.8%,
respectively, of revenues in 1996. The loss of any major customer, or the delay
in or reduction of orders from such customers could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors -- Reliance on Third Party Distribution."
Gross Profit
Gross profit increased 368% from $1.4 million in 1995 to $6.6 million in
1996, representing 36.1% and 35.3%, respectively, of revenues. The absolute
dollar increase in gross profit resulted from increased revenues, while the
decline in gross profit as a percentage of revenues is primarily due to an
increased proportion of sales to OEMs, which generally yield lower margins. The
Company expects that gross margins may decrease over time as a result of
competitive pricing pressures and changes in sales channel and product mix.
20
<PAGE> 22
The Company's gross margin is affected by many factors, including the sales
channel mix, the mix of products sold, increased competition and related
decreases in unit average selling prices, introductions of new products and the
availability, reliability and cost of components and products from the Company's
subcontractors and suppliers. In addition, the Company orders products in
advance of planned shipments and, due to rapid technological changes or other
factors such as customers curtailing or changing timing or mix of orders, there
is a risk that the Company will forecast incorrectly and produce excess or
insufficient inventories of particular products. The Company's customers'
ability to reschedule or cancel orders without significant penalty could
adversely affect the Company's operating results, as the Company may be unable
to adjust its purchases from its subcontractors and suppliers to match such
customers' changes and cancellations. See "Risk Factors -- Dependence on
Subcontractors and Sole-Source Suppliers" and "-- Significant Variability in
Quarterly Results."
Operating Expenses
Research and Development. Research and development expenses increased from
$2.6 million in 1995 to $2.7 million in 1996, representing 66.9% and 14.3%,
respectively, of revenues. Research and development expenses consist primarily
of personnel costs and other personnel-related expenses, including the services
of outside consultants. Research and development expenses during 1995 were
negatively impacted by a heavy reliance on consultants, who are generally more
expensive than employees. In 1996, research and development expenses were
positively impacted by the receipt of a $190,000 non-recurring engineering fee
from a technical partner to facilitate the development of the Company's AccelPRO
product line. The Company anticipates that research and development expenses
will increase in absolute dollars as the Company continues to add research and
development personnel and support for new product development activities.
Sales and Marketing. Sales and marketing expenses increased 68.8% from $2.2
million in 1995 to $3.6 million in 1996, representing 55.1% and 19.5%,
respectively, of revenues. Sales and marketing expenses consist primarily of
salaries, commissions, marketing expenses and technical support for the sales
organization. The absolute dollar increase in sales and marketing expenses was
due primarily to the expansion of the Company's sales efforts in the United
States, Europe and the Pacific Rim, as well as increased marketing and public
relations activities related to the introductions in 1996 of the AccelPRO and
AccelPRO TX product lines. The Company anticipates that sales and marketing
expenses will continue to increase in absolute dollars as the Company expands
its sales force and marketing activities.
General and Administrative. General and administrative expenses increased
by 8.9% from $1.0 million in 1995 to $1.1 million in 1996, representing 26.6%
and 6.0%, respectively, of revenues. Increased general and administrative
expenses were due primarily to increased staffing and other costs incurred to
support the Company's growth. The Company anticipates that general and
administrative expenses will increase in absolute dollars to support the
Company's growth and for costs associated with operating as a public company.
Interest Expense
Interest expense in both 1995 and 1996 primarily related to interest on the
subordinated convertible note payable to Kubota.
Provision for Income Taxes
The Company recorded no provision for income taxes in 1995 and 1996 as it
incurred losses. At December 31, 1996, the Company had approximately $3.5
million of federal net operating loss carryforwards available to offset future
taxable income. Future annual use of these carryforwards may be limited as a
result of ownership change limitations.
At December 31, 1996, the Company had approximately $2.2 million of
deferred tax assets, comprised primarily of net operating loss and credit
carryforwards and reserves not currently deductible for tax purposes. The
Company believes the available objective evidence creates sufficient uncertainty
regarding the realizability of such deferred tax assets; therefore a full
valuation allowance has been recorded. The factors considered include the
Company's history of losses, the lack of carryback capacity to realize deferred
tax assets, the limitation on the annual utilization of net operating loss
carryforwards, the uncertainty of the development of the products and markets in
which the Company competes and the fact that the market in
21
<PAGE> 23
which the Company competes is intensely competitive and characterized by rapidly
changing technology. The Company believes that based on the currently available
evidence, it is more likely than not that the Company will not generate
sufficient taxable income to realize the Company's deferred tax assets.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly financial
information for the eight quarters ended December 31, 1996, and as a percentage
of the Company's revenues for the periods. In the opinion of management, the
data has been prepared on a basis consistent with the Company's annual
consolidated financial statements included elsewhere in the Prospectus and
includes all adjustments, consisting only of normal recurring adjustments that
management considers necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for any future period. See "Risk Factors -- Significant
Variability in Quarterly Results."
The Company operates under thirteen week quarters that end on the Friday
closest to the calendar quarter end. As a result, a fiscal quarter may not end
on the same day as the calendar quarter end. For convenience of presentation,
the following unaudited quarterly financial information has been shown as ending
on the last day of the calendar quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.............................. $ 284 $ 790 $ 1,036 $ 1,801 $ 2,371 $ 3,067
Cost of revenues...................... 220 497 661 1,123 1,470 2,015
------- ------- ------- ------ ------ ------
Gross profit.......................... 64 293 375 678 901 1,052
------- ------- ------- ------ ------ ------
Operating expenses:
Research and development............ 850 583 592 593 468 586
Sales and marketing................. 498 486 548 622 689 817
General and administrative.......... 256 263 227 293 276 238
------- ------- ------- ------ ------ ------
Total operating expenses.......... 1,604 1,332 1,367 1,508 1,433 1,641
------- ------- ------- ------ ------ ------
Income (loss) from operations......... (1,540) (1,039) (992) (830) (532) (589)
Interest expense...................... (54) (52) (38) (39) (37) (35)
Other income (expense), net........... 61 22 11 25 9 29
------- ------- ------- ------ ------ ------
Net income (loss)..................... $(1,533) $(1,069) $(1,019) $ (844) $ (560) $ (595)
======= ======= ======= ====== ====== ======
<CAPTION>
SEPT. 30, DEC. 31,
1996 1996
--------- ---------
<S> <C><C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.............................. $ 4,260 $ 8,973
Cost of revenues...................... 2,859 5,733
------ ---------
Gross profit.......................... 1,401 3,240
------ ---------
Operating expenses:
Research and development............ 794 815
Sales and marketing................. 955 1,174
General and administrative.......... 230 387
------ ---------
Total operating expenses.......... 1,979 2,376
------ ---------
Income (loss) from operations......... (578) 864
Interest expense...................... (36) (37)
Other income (expense), net........... 16 (6)
------ ---------
Net income (loss)..................... $ (598) $ 821
====== =========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF REVENUES:
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 77.5 62.9 63.8 62.4 62.0 65.7
------ ------ ----- ----- ----- -----
Gross profit.......................... 22.5 37.1 36.2 37.6 38.0 34.3
------ ------ ----- ----- ----- -----
Operating expenses:
Research and development............ 299.3 73.8 57.1 32.9 19.7 19.1
Sales and marketing................. 175.4 61.5 52.9 34.5 29.1 26.6
General and administrative.......... 90.1 33.3 21.9 16.3 11.6 7.8
------ ------ ----- ----- ----- -----
Total operating expenses.......... 564.8 168.6 131.9 83.7 60.4 53.5
------ ------ ----- ----- ----- -----
Income (loss) from operations......... (542.3) (131.5) (95.8) (46.1) (22.4) (19.2)
Interest expense...................... (19.0) (6.6) (3.7) (2.2) (1.6) (1.1)
Other income (expense), net........... 21.5 2.8 1.1 1.4 0.4 0.9
------ ------ ----- ----- ----- -----
Net income (loss)..................... (539.8)% (135.3)% (98.4)% (46.9)% (23.6)% (19.4)%
====== ====== ===== ===== ===== =====
<CAPTION>
SEPT. 30, DEC. 31,
1996 1996
--------- ---------
<S> <C><C> <C>
AS A PERCENTAGE OF REVENUES:
Revenues.............................. 100.0% 100.0%
Cost of revenues...................... 67.1 63.9
----- -----
Gross profit.......................... 32.9 36.1
----- -----
Operating expenses:
Research and development............ 18.6 9.1
Sales and marketing................. 22.4 13.1
General and administrative.......... 5.5 4.3
----- -----
Total operating expenses.......... 46.5 26.5
----- -----
Income (loss) from operations......... (13.6) 9.6
Interest expense...................... (0.8) (0.4)
Other income (expense), net........... 0.4 (0.1)
----- -----
Net income (loss)..................... (14.0)% 9.1%
===== =====
</TABLE>
22
<PAGE> 24
Revenues in the fourth quarter of 1996 increased primarily due to the
market acceptance of the Company's AccelPRO and AccelPRO TX product lines and
increased shipments to a new OEM customer. Gross margin in the second and third
quarters of 1996 were adversely impacted by inventory reserves in contemplation
of the discontinuance of the Company's AG300/500 product line and increased
manufacturing overhead costs. Gross margin in the fourth quarter of 1996 was
positively impacted by lower component costs. Research and development expenses
were higher in the first quarter of 1995 due to a heavy reliance on consultants,
which are generally more expensive than employees, used in developing the
Company's initial product line. Research and development expenses in the first
quarter of 1996 were positively impacted by the receipt of a $190,000
non-recurring engineering fee from a technical partner to facilitate the
development of the Company's AccelPRO product line. General and administrative
expenses have varied over the eight quarters primarily due to the timing of the
Company's use of consultants for certain general and administrative functions.
General and administrative expenses in the fourth quarter of 1996 increased due
to increased personnel and related costs as well as other costs incurred to
support the Company's overall growth.
The Company's quarterly operating results have varied significantly in the
past and are likely to vary significantly in the future. The Company's quarterly
results are affected by a wide variety of factors including the gain or loss of
significant customers, size and timing of individual orders, timely introduction
and market acceptance of new products offered by the Company and its
competitors, availability, reliability and cost of components, the Company's
success in negotiating OEM and other customer agreements, customer order
deferrals in anticipation of new products, technological changes in operating
systems or applications, variations in manufacturing quality or capacities,
changes in the pricing policies of the Company or its competitors, changes in
demand for 3D graphics functionality, changes in the mix of revenues from
products having differing gross margins, changes in sales channel mix, changes
in average sales prices, warranty expenses, fluctuations in the Company's
expense levels, the Company's success at expanding its direct sales force and
indirect distribution channels, risks related to international operations,
extraordinary events such as litigation or acquisitions and general industry and
economic conditions, as well as other factors. Any of the above risks could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Quarterly revenues and operating results depend primarily on the volume,
timing and shipment of orders during the quarter, which are difficult to
forecast because customers generally place their orders on an as-needed basis
and, accordingly, the Company has historically operated with a relatively small
backlog. The Company's third party distribution channels provide the Company
with limited information regarding the quantity of the Company's products in the
sales channel. This reduces the Company's ability to predict fluctuations in
revenues resulting from a surplus or a shortage in its distribution channel and
could contribute to volatility in the Company's results of operations and cash
flows. A surplus of inventory in the distribution channel could unexpectedly
cause a reduction in product shipments and revenues. Moreover, a
disproportionate percentage of the Company's revenues in any quarter may be
generated in the last month of a quarter. As a result, a shortfall in revenues
in any quarter as compared to expectations may not be identifiable until near
the end of the quarter. The Company may experience relatively weak demand in
third quarters due to historically weak summer sales in Europe.
The Company's gross margins are impacted by the sales channel mix, mix of
products sold, increased competition and related decreases in unit average
selling prices, introduction of new products, availability, reliability and cost
of components from the Company's subcontractors and suppliers, and general
economic conditions. Currently, the Company is focusing on increasing its sales
to OEMs, which have historically yielded lower margins than other channels.
Individual product lines generally provide higher margins at the beginning of
the life cycle and lower margins as the product line matures. In addition, the
Company's markets are characterized by rapidly changing technology and declining
average selling prices. Accordingly, the Company's gross margins may decline
from the levels experienced to date, which could have an adverse effect on the
Company's business, financial condition and results of operations.
A significant portion of the Company's operating expenses are relatively
fixed in the short term and planned expenditures are based on revenue forecasts.
As a result, if revenues are below levels needed to offset these operating
expenses, the Company's business, financial condition and results of operations
may be disproportionately affected because only a portion of the Company's
expenses vary with revenue. The
23
<PAGE> 25
Company generally must plan production, order components and undertake its
development, sales and marketing activities several months in advance of
shipping product and recognizing revenues. Accordingly, any shortfall in
revenues in a given quarter may impact the Company's operating results and cash
balances in a magnified way due to the Company's inability to adjust expenses or
inventory during the quarter to match the level of revenues for the quarter. In
addition, in the event the Company's customers desire to purchase products in
excess of forecasted amounts, the Company may not have sufficient inventory or
access to sufficient manufacturing capacity to meet such demands. Although the
Company has experienced growth in revenues in recent quarters, there can be no
assurance that the Company will sustain such revenue growth or be profitable on
an operating basis in any future period. For the foregoing reasons, the Company
believes that period-to-period comparisons of its results are not necessarily
meaningful and should not be relied upon as indications of future performance.
Further, it is likely that in some future quarter the Company's revenues or
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Common Stock could be materially
adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of $7.3 million of Redeemable Convertible Preferred Stock and
Common Stock, the issuance of $3.3 million of convertible debt and, to a lesser
extent, credit lines. Cash used in operations was $4.6 million in 1995 and $1.3
million in 1996. For 1995, net cash used in operations was due primarily to the
net loss of $4.5 million and increases in accounts receivable and inventories
associated with higher revenues, which were partially offset by an increase in
accounts payable and other liabilities. Net cash used in operations for 1996 was
primarily due to the net loss of $932,000 and a $3.3 million increase in
accounts receivable which was partially offset by a decrease in inventories and
increases in accounts payable, accrued liabilities and customer deposits.
Net cash used in investing activities was approximately $250,000 in each of
1995 and 1996 due primarily to the purchase of property and equipment. The
Company has no significant capital spending or purchase commitments other than
normal purchase commitments and commitments under leases. Net cash provided by
financing activities was $4.1 million and $3.2 million in 1995 and 1996,
respectively, due primarily to proceeds from the issuance of Preferred Stock.
The Company has not invested in derivative securities or any other
financial instrument that involves a high level of complexity or risk.
Management expects that, in the future, cash in excess of current requirements
will be invested in investment-grade, interest-bearing securities.
At December 31, 1996, the Company had $3.0 million in cash and cash
equivalents. The Company has a revolving line of credit agreement with a bank,
which provides, through October 1997, for maximum borrowings in an amount up to
the lower of 80% of eligible accounts receivable or $3.0 million. Borrowings
under the line are secured by all of the Company's assets and bear interest at
the bank's prime rate plus 0.25% per annum (8.5% at December 31, 1996). The
agreement requires that the Company maintain certain financial ratios and levels
of tangible net worth and profitability and also restricts the Company's ability
to pay cash dividends. At December 31, 1996, there were no borrowings and $1.1
million of standby letters of credit to vendors were outstanding under the line
of credit.
The Company believes that existing cash and cash equivalents of $3.0
million, its available borrowings and lines of credit, together with anticipated
net proceeds from this offering, will be sufficient to finance its working
capital and capital expenditure requirements for at least the next 12 months.
Thereafter, the Company may require additional funds to support its working
capital requirements or for other purposes and may seek to raise such additional
funds through bank borrowings and public or private sales of its securities,
including equity and debt securities. The Company's future capital requirements
will depend on numerous factors, including, without limitation, the success of
marketing, sales and distribution efforts, market acceptance of the Company's
products, the progress of its research and development programs, the costs
involved in defending and enforcing intellectual property rights, competition,
competing technological and market developments, and the effectiveness of
product commercialization activities and arrangements. There can be no assurance
that additional funds, if required, will be available to the Company on
favorable terms or at all.
24
<PAGE> 26
BUSINESS
AccelGraphics is a leading provider of high-performance, cost-effective, 3D
graphics subsystems, software accelerators and application utility software
products for the professional Windows NT and Windows 95 markets. The Company
pioneered the development of professional 3D graphics subsystems for use with
Microsoft's Windows NT operating system. A 3D graphics subsystem integrates
graphics acceleration chip(s), specialized hardware, firmware, software and
memory. The Company's 3D graphics subsystems, when included in an Intel Pentium,
Pentium Pro or Digital Alpha based computer, create a new class of computer
system called a "Personal Workstation." Personal Workstations, which often sell
for less than $10,000, provide capabilities and performance comparable to more
expensive 3D graphics RISC/UNIX workstations. In January 1995, AccelGraphics
shipped what the Company believes was the first 3D graphics subsystem for NT and
currently offers three distinct 3D graphics subsystem product lines.
The Company's products include a family of 3D graphics subsystems for
applications based on OpenGL and other 3D APIs, such as Autodesk's Heidi.
Through the Company's extensive experience in 3D algorithms, the interaction of
3D applications with OpenGL and overall 3D graphics system integration,
AccelGraphics delivers robust, well-integrated subsystem solutions to the
professional 3D graphics market. According to International Data Corporation
("IDC"), the unit volume of 3D graphics subsystems enabling personal
workstations will grow at a compounded annual growth rate of 106% from 36,000
units in 1996 to over 650,000 units in the year 2000.
The Company sells its products through OEMs and a worldwide network of VARs
and distributors. The Company sells fully-integrated 3D graphics subsystems to
Digital, Epson Direct, HP, Hitachi, Ltd., Samsung Electronics Co., Ltd. and
Tri-Star Computer Corporation for use in high-performance Personal Workstations.
The Company also has technical relationships with Intel Corporation ("Intel")
and Microsoft, as well as with key component suppliers including 3Dlabs, Cirrus
Logic, Inc. and Texas Instruments, Inc. To enhance the performance of
applications which use the Company's 3D graphics subsystems, AccelGraphics has
developed relationships, some of which include joint engineering projects, with
many leading ISVs such as Autodesk and Kinetix, Computer Associates
International, Inc., EDS's Unigraphics division, Matra Datavision S.A.,
Microsoft's Softimage, PTC, Ricoh Corporation, SDRC and Visible Decisions, Inc.
INDUSTRY BACKGROUND
3D computing is a highly effective way to realistically and intuitively
visualize, analyze, animate and communicate data. A 3D computer model provides a
robust representation of an object's structural and behavioral characteristics,
thereby simulating that object's realistic appearance and functionality.
Engineers, designers, scientists and researchers who previously used 2D
technology now can work faster and more efficiently by using 3D technology to
create, modify and complete more sophisticted models. In addition, animators and
creative artists use 3D computing to create the illusion of reality in exciting
and entertaining motion pictures, games and commercials.
3D computing is inherently complex and computationally demanding, requiring
up to or greater than half a billion calculations per second. As a result, early
efforts at 3D computing required expensive mainframe-class computers. 3D
computing remained largely inaccessible to most users except in industries such
as defense and nuclear power. However, in the 1980s, the 3D computing
marketplace grew dramatically with the introduction of lower cost, integrated
RISC/UNIX workstations. Today, the RISC/UNIX workstation is the primary
environment for 3D computing professionals, and according to IDC, total sales of
RISC/UNIX workstations were approximately $12 billion in 1996.
As the RISC/UNIX workstation market developed, vendors differentiated their
products by developing proprietary operating systems, buses, processors, APIs
and 3D graphics subsystems. While RISC/UNIX workstations continue to provide
high-performance 3D graphics capabilities, they remain costly due to relatively
low production volumes, advanced technology, custom components and proprietary
architectures. In 1996, a RISC/UNIX workstation with advanced 3D graphics
capabilities typically ranged in price from $20,000 to over $100,000. In
addition, such workstations can be difficult and expensive to integrate into
corporate computing networks. Further, because many PC applications do not run
efficiently on RISC/UNIX
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workstations, users desiring access to both 3D graphics and PC applications
often purchased both a PC and a RISC/UNIX workstation for their desktops.
In contrast to RISC/UNIX workstations, 3D capabilities of the PC have been
extremely limited due to restrictions of PC operating systems and the lack of
sufficient microprocessor power, application software and high-performance
standard 3D APIs. Several technological innovations, including Intel's Pentium
and Pentium Pro processors and PCI bus architecture, Microsoft's NT operating
system and the introduction of OpenGL, a high-performance graphics API, have
overcome many of these limitations. However, systems based only on these
technologies are still not able to satisfy the demanding performance
requirements of professional 3D computing. Specifically, to perform fully
functional, high-performance 3D computing, an integrated 3D graphics subsystem
is also required.
Creating a 3D graphics subsystem is substantially more demanding than
creating a 2D graphics subsystem. Both 2D and 3D require the display of pixels
on the screen, but 3D typically requires 10 to 100 times more computations in
order to accurately display a dynamic 3D object, including computations for 3D
axis geometry, color, depth, transparency, lighting and textures. 3D graphics
subsystems also need to support numerous software applications that have been
architected in different ways. Animation applications, for instance, require
different features and performance characteristics than Mechanical Computer
Aided Design ("MCAD") applications or simulation applications because the end
users have different requirements. At the same time, performance within all 3D
applications must meet certain benchmarks to satisfy user expectations. For
example, to convey a sense of movement, interactive 3D graphics applications
typically re-compute and re-render each scene 20 to 30 times each second to
achieve smooth motion in a manner similar to that of television and motion
pictures.
3D graphics subsystems are implemented in a series of processing steps
often called a "pipeline" as illustrated in the diagram below. The 3D graphics
pipeline takes commands from the application, processes these commands and
ultimately creates the individual pixels on the screen. Each stage of the 3D
graphics pipeline has particular complexities that require robust, integrated
solutions to overcome performance bottlenecks and potential errors. Regardless
of the underlying speed of the host CPU and graphics accelerator, if each stage
of the pipeline is not optimized, the performance delivered to the end user may
be unacceptably slow. In particular, the method by which an application
communicates to the graphics library and optimizes its usage is critical.
3D GRAPHICS PIPELINE
Many applications which utilize 3D graphics pipelines were previously only
available on RISC/UNIX workstations. However, 3D application developers have
recognized the market potential of the lower-cost
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Windows NT computing environment and have either ported or have begun to port
their applications to NT. One of the first significant 3D UNIX applications
ported to NT was PTC's ProENGINEER in late 1994. The NT version of PTC's
ProENGINEER has been an increasing portion of PTC's revenue since its
introduction. Dataquest predicts that by 1999, Windows NT will power nearly six
times the number of workstations as UNIX. IDC predicts that the unit volume of
3D graphics subsystems enabling NT workstations will grow at a compounded annual
growth rate of 106% from 36,000 units in 1996 to over 650,000 units in the year
2000.
THE ACCELGRAPHICS SOLUTION
AccelGraphics pioneered the development of professional 3D graphics
subsystems for use with NT. In January 1995, AccelGraphics' AG300 was the first
3D graphics subsystem demonstrated and certified by PTC. The Company's 3D
graphics subsystems, when included in an Intel Pentium, Pentium Pro or Digital
Alpha based computer, create a new class of computer system called a "Personal
Workstation." Personal Workstations, which often sell for less than $10,000,
provide capabilities and performance comparable to more expensive 3D graphics
RISC/UNIX workstations. The Personal Workstation is now a viable, cost-effective
option for 3D professionals, and an affordable solution for users previously
limited to 2D graphics capabilities.
The AccelGraphics' solution includes high-performance, cost-effective, 3D
graphics subsystems, software accelerators and application utility software
integrated for optimal 3D graphics performance. The Company has extensive
experience in 3D algorithms, the interaction of 3D applications with OpenGL and
overall 3D graphics system integration. Through its detailed understanding of
application requirements and hardware capabilities, AccelGraphics delivers a
robust, well-integrated subsystem solution to the 3D professional market. An
AccelGraphics-enabled Personal Workstation delivers the 3D graphics performance
many professionals require while also enabling them to operate their PC
applications on the same machine.
STRATEGY
The Company's objective is to become the leading supplier of
high-performance 3D graphics subsystems and 3D enabling software applications
for professional users. The Company's business strategy includes the following:
Extend Leadership Position in Professional 3D Graphics on Personal
Workstations. The Company believes that it has established a leading position in
3D graphics on Personal Workstations for professional applications. The Company
intends to build upon its brand name by introducing more 3D graphics subsystems
and feature-rich software applications, by continuing to integrate greater 3D
graphics functionality and performance for professional 3D graphics users and by
expanding its relationships with professional ISVs and OEMs.
Provide System Engineered Solutions. The Company creates integrated 3D
graphics solutions which are engineered to optimize each step of the 3D graphics
pipeline. AccelGraphics' strategy is to maximize overall Personal Workstation
performance by engineering its solutions to efficiently interface with all parts
of the system as well as effectively allocate processing power between the host
system and 3D graphics subsystem.
Cultivate Relationships with ISVs. The Company intends to continue forging
engineering and marketing relationships with leading ISVs and to expand joint
marketing activities. For example, the Company successfully supported the
migration to NT of UNIX software applications from EDS's Unigraphics division,
Microsoft's Softimage and SDRC. Through engineering involvement in the porting
of major 3D UNIX applications to the NT platform, the Company enhances the
performance of its graphics subsystems with these applications and often becomes
an ISV's initial preferred 3D graphics solution.
Expand OEM and International Sales. OEMs constitute the most significant
channel through which professional users purchase Personal Workstations
incorporating the Company's 3D graphics subsystems. The Company intends to add
personnel to provide more sales coverage and support for targeted OEM prospects
and customers. In addition, the Company intends to continue expanding its sales
presence in international markets by establishing additional relationships with
foreign distributors and hiring foreign resident sales personnel.
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Develop and Penetrate New Markets. The Company plans to aggressively pursue
3D UNIX users as UNIX-based 3D graphics applications continue to migrate to the
NT platform. AccelGraphics also recognizes the market potential of 2D graphics
end users moving up to 3D graphics as end users discover that the power of
professional 3D computing has suddenly become affordable. As an example, over
20,000 former users of 2D technology have acquired the Company's 3D technology
in conjunction with Autodesk's Mechanical Desktop, a mechanical design and
modeling application which includes the Company's AccelVIEW 3D technology.
Focus on Value Added Software. The Company intends to continue to provide
value added 3D software applications to 3D graphics professionals. The Company
has successfully developed and introduced its AccelVIEW 3D software product for
AutoCAD and its Flying Carpet plug-in to Netscape Navigator and Microsoft
Internet Explorer. The Company believes that value added 3D software
applications provide not only a source of higher margin revenue, but an
additional market opportunity for graphics subsystem upgrades as users look for
increased productivity and performance.
Silicon Independence. The Company pursues a strategy of silicon
independence. This strategy enables the Company to avoid the significant fixed
costs and risks associated with the development, manufacture and testing of 3D
graphics microprocessors and to benefit from the freedom and flexibility of
selecting the best chip available for each product offering.
PRODUCTS
The Company's product offerings include a range of professional 3D graphics
subsystems, accelerator software and application utility software products
marketed under the Accel brand name. In 1996, a majority of the Company's
revenues were derived from the AccelPRO and AccelPRO TX product lines. Each of
the Company's 3D graphics subsystem products support the PCI bus and major
professional 3D graphics APIs including OpenGL and Autodesk's Heidi. The
Company's products support NT and in some cases Windows 95. The Company's
products have been incorporated into systems that use Intel's Pentium and
Pentium Pro processors, Motorola's Power PC, Digital's Alpha and SGI's MIPS
processors. In addition, the Company has developed accelerator software and
software utilities that improve the 3D graphics capabilities of ISV
applications, including Autodesk's AutoCAD and Mechanical Desktop, Microsoft
Internet Explorer and Netscape Navigator.
The Company's principal product lines are summarized below. Suggested end
user United States prices vary depending on system configuration.
- --------------------------------------------------------------------------------
HARDWARE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
PRODUCT LINE INTRODUCTION DESCRIPTION SUGGESTED END USER
-------------- DATE --------------------------------- PRICE
-------------- ---------------------
AccelPROTX August 1996 High-performance 3D graphics $2,295 - $2,795
subsystems with advanced hardware
texture and anti-aliasing support
AccelPRO June 1996 High-performance 3D graphics $1,795 - $2,495
subsystems without hardware
texture support
AccelSTAR November 1996 Entry-level 3D graphics $595 - $695
subsystems with limited hardware
texture support
</TABLE>
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
SOFTWARE
----------------------------------------------------------------------------------------------
INTRODUCTION
PRODUCT DATE DESCRIPTION SUGGESTED END USER PRICE
-------------- ----------------------------------- -------------------------
<S> <C> <C> <C>
AccelVIEW 3D March 1996 Software add-on to Autodesk's $395
AutoCAD to deliver interactive 3D
graphics
Flying February 1997 Plug-in to Netscape Navigator and $49
Carpet Microsoft Internet Explorer for
display of and interaction with
very large VRML data sets
Flying February 1997 Data converter companion product to $49
Carpet Flying Carpet
Converter
</TABLE>
AccelPRO TX -- The AccelPRO TX subsystem supports OpenGL features such as
Gouraud shading, anti-aliasing, transparency and advanced features such as
hardware texture mapping. The product incorporates the GLINT 500TX and GLINT
Delta chips from 3Dlabs, up to 16 MB of combined VRAM and DRAM memory supporting
up to 1280 x 1024 resolution and on-board VGA. The subsystem is targeted to
customers who seek a robust 3D graphics subsystem solution for CAD design,
animation and network management applications.
AccelPRO -- The AccelPRO supports 1280 x 1024 resolution, 15 bits of color
and a 24 bit Z-buffer. The subsystem includes on-board VGA support and up to 16
MB of total graphics memory. The AccelPRO incorporates the GLINT 300SX and GLINT
Delta chips from 3Dlabs. The 3D graphics subsystem is targeted to customers who
seek excellent 3D performance but do not require hardware texture mapping
support.
AccelSTAR -- The AccelSTAR is an entry level 3D graphics subsystem that
supports the full features of OpenGL including Gouraud shading, texture mapping
and transparency, and includes on-board VGA. The 3D graphics subsystem sells for
a price comparable to a high-end 2D graphics subsystem. The AccelSTAR
incorporates the Permedia and Delta chips from 3Dlabs and up to 8 MB of total
memory. The AccelSTAR is targeted to price sensitive customers who do not
require large amounts of texture memory.
AccelVIEW 3D -- AccelVIEW 3D enables users of AutoCAD Release 13c4 on NT or
Windows 95 to perform dynamic interactive design and viewing on any database
that has been created with AutoCAD. With AccelVIEW 3D, users are able to quickly
render single parts or assemblies, as well as dynamically manipulate and
seamlessly interact with and edit wireframe, hidden-line and shaded models.
AccelVIEW 3D is tightly integrated with AutoCAD and operates as if it were a
standard part of the application. AccelVIEW 3D can work either with or without
an add-on 3D accelerator card.
Flying Carpet -- The Flying Carpet plug-in is an advanced 3D viewer for
manipulating large models and assemblies. Unlike other Virtual Reality Markup
Language ("VRML") viewers that have limitations on model size or are very slow
if the models exceed two to four thousand polygons, Flying Carpet can handle
virtually unlimited model sizes and can manipulate them up to 10 times faster
than competitive VRML viewers. Accurate data of the model is always available
for close inspection and accurate analysis. The tools for navigating through or
around a 3D model environment are robust and easy to learn. Flying Carpet is
designed for companies who are moving to a Web-based information access
architecture and want to integrate 3D geometric product data for collaborative
engineering.
Flying Carpet Converter -- The Flying Carpet Converter allows customers to
convert common VRML 1.0 and 2.0 files to the high-performance native format
supported by Flying Carpet. When converted to this native format, typically
large data files are 3 to 5 times smaller and load 3 to 5 times faster across
the Internet or intranet than the corresponding VRML file.
TECHNOLOGY AND CORE COMPETENCIES
AccelGraphics invests in several key technologies and believes the Company
possesses skills in the various disciplines and technology areas which are
necessary for developing professional 3D computing products. These competencies
include:
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OpenGL 3D Expertise. The Company enhances its products through a
proprietary high-performance 3D software implementation of OpenGL and is a
direct OpenGL licensee. The Company has invested thousands of engineering hours
in its version of the OpenGL software library, which currently contains four
times more lines of code than the original sample implementation made available
by SGI. The Company optimizes the performance of its OpenGL software library by
eliminating much of the testing and branching required to process data and
instruction streams, while adding routines optimized for various application
profiles. This effort has resulted in what the Company believes is the fastest
and most stable version of OpenGL available for Windows NT.
Software Systems Integration. The Company has invested in the development
and expansion of the "transport layer" of software that manages the direct
interfaces associated with various parts of the overall system. The parts of the
system include the virtual memory manager, the CPU and its timing, the PCI bus
implementation, the graphic board and chips, data buffer size specifications and
management, specific system configuration issues, NT register settings and other
device driver components. To ensure error-free operation with maximum
performance, the Company continually modifies and optimizes its software to
properly integrate with the various systems and applications that utilize the
Company's 3D graphics subsystems.
3D Development Tools. The Company has developed tools to determine how
applications operate and how they utilize the 3D graphics pipeline. Using these
proprietary development tools, AccelGraphics' engineers gain an understanding of
the structure and function of an application enabling them to optimize the API,
graphics libraries and hardware to efficiently process commands from each
application. The Company has developed specific features for, and optimized the
performance of, its software and its hardware with the goal that key
applications will perform better with its 3D graphics subsystems than with
competitive solutions.
Hardware Design and Systems Engineering. The Company's three distinct 3D
graphics subsystem product lines have been designed and introduced in the past
two years. An in-depth understanding of the importance of layout, trace lines,
memory interaction, chip characteristics, software implementation, BIOS
technologies and bus technology all contribute to building products and systems
that deliver reliable performance. By focusing on system level design, the
Company's 3D graphics subsystems integrate easily into Personal Workstations.
2D and 3D Expertise. In addition to the Company's 3D expertise, the Company
has extensive experience and maintains active software development efforts in 2D
graphics. The Company believes experience and competency in the smooth
implementation and interaction of 2D with 3D delivers a more robust solution to
a broader range of users.
STRATEGIC RELATIONSHIPS
The NT workstation market is comprised of many vendors collaborating to
produce a complete solution for end users. The Company has developed close
strategic relationships with key companies in this market and participates in
industry consortiums from several market segments. AccelGraphics believes these
relationships provide access to the leading-edge information and technology that
the Company needs to remain at the forefront of this rapidly changing market.
The Company has technical relationships with Intel and Microsoft, as well
as with key component suppliers, including 3Dlabs, Cirrus Logic, Inc. and Texas
Instruments Inc. These relationships include joint engineering development and
have often resulted in modifications to suppliers' product features and
performance through architectural review and early product evaluation.
The Company maintains relationships, some of which include joint
engineering projects, with many leading ISVs such as Autodesk and Kinetix,
Computer Associates International, Inc., EDS's Unigraphics division, Matra
Datavision S.A., Microsoft's Softimage, PTC, Ricoh Corporation, SDRC and Visible
Decisions, Inc. Examples include developing overlay software with engineers from
Microsoft's Softimage group, engineering the migration from UNIX to NT with SDRC
and developing and then imbedding 3D technology to power Autodesk's Mechanical
Desktop. In the case of Autodesk, the Company receives royalty payments on each
sale of Mechanical Desktop. By providing resources and assisting its ISV
partners in their transition to NT, the Company has often gained a period of
market advantage for new NT applications. This
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advantage results from the Company's 3D graphics subsystems often being the
first subsystem certified by the ISV and sometimes the only subsystem supported
by the application for an exclusive period of time.
To develop advanced knowledge and influence the direction of new
technologies and products, the Company is actively involved in various
technology consortiums, industry standards organizations and special interest
groups. The Company's engineers are active in the OpenGL Architectural Review
Board, the VRML Consortium and the PCI Special Interest Group.
3D PROFESSIONAL MARKETS AND APPLICATIONS
The Company focuses on the professional 3D graphics market and has
engineered 3D solutions to support its ISV partners. In many cases, the
Company's products were the first NT-based products supported by these ISVs. The
following table illustrates various 3D market segments. Identified within each
market segment are selected ISVs, their 3D software applications and examples of
customers using the respective applications.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
ISV APPLICATION ISV CUSTOMER EXAMPLES
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
MECHANICAL COMPUTER AIDED DESIGN -- Electronic design of products prior to manufacturing
Autodesk Mechanical Desktop Siemens, Wisney Design
EDS Unigraphics II General Motors
Matra Datavision S.A. Prelude Design Renault
PTC Pro/ENGINEER Caterpillar, John Deere
Ricoh Corporation DESIGNBASE Hitachi, Mitsubishi
SolidWorks Corporation SolidWorks 97 Northrop Grumman
SDRC I-DEAS Master Series Ford Motor
- ----------------------------------------------------------------------------------------------
ENGINEERING ANALYSIS -- Verification of structural, vibration and thermal integrity
Altair Computing, Inc. HyperMesh Chrysler, Nissan Motor
ANSYS, Inc. ANSYS General Electric, 3M
Mechanical Dynamics Adams Caterpillar
Incorporated
- ----------------------------------------------------------------------------------------------
ANIMATION AND MULTIMEDIA AUTHORING -- Creation of motion pictures, games, commercials
Kinetix 3D Studio MAX Broderbund, DreamWorks
Microsoft Softimage 3D LucasArts Entertainment, Sony
NewTek, Inc. LightWave 3D Broderbund, Mindscape
- ----------------------------------------------------------------------------------------------
ARCHITECTURE, ENGINEERING AND CONSTRUCTION -- Plant design, maintenance, and architectural
design
Bentley Systems, Microstation AMOCO, Dow Chemical
Incorporated
CADCENTRE, Ltd. Plant Design Maintenance Brown & Root, Nuclear Fuel
Services
EA Systems Inc. Plant Walk Mitsui Engineering
- ----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 33
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
ISV APPLICATION ISV CUSTOMER EXAMPLES
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
NETWORK MANAGEMENT -- Network and facilities management with 3D interpretation capabilities
Computer Associates CA Unicenter TNG Xerox
International, Inc.
- ----------------------------------------------------------------------------------------------
VISUALIZATION -- Representation of complex data such as weather or fluids flows
Advanced Visual AVS Express NASA, Sandia National
Systems Inc. Laboratories
- ----------------------------------------------------------------------------------------------
FINANCIAL VISUALIZATION -- Decision support for financial analysis
Visible Decisions, Inc. Discovery Canadian Imperial Bank
- ----------------------------------------------------------------------------------------------
SIMULATION AND TRAINING SYSTEMS -- Flight training, driver education and corporate training
Sense 8 Corporation World Tool Kit AMOCO, BMW
- ----------------------------------------------------------------------------------------------
</TABLE>
CUSTOMERS, SALES AND MARKETING
Sales. The Company's sales efforts consist of a combination of direct sales
to OEMs and a worldwide network of VARs and distributors. As of December 31,
1996, direct sales, marketing and support staff totaled 20 people located in
Northern California, Southern California, Florida, New Jersey, Ohio and
Wiesbaden, Germany. Pacific Rim sales are directed by the Vice President of Asia
Sales out of the Company's San Jose headquarters. International sales revenues
represented approximately 31% of revenues in 1996.
OEMs. The Company sells fully-integrated 3D graphics subsystems to Digital,
Epson Direct, HP, Hitachi, Ltd., Samsung Electronics Co., Ltd. and Tri-Star
Computer Corporation for use in high-performance Personal Workstations.
AccelGraphics works closely with its OEM customers to ensure the complete
testing of the Company's 3D graphics subsystems within their Personal
Workstations to achieve maximum system performance and error-free integration.
VARs and Distributors. The Company distributes its products in 32 countries
through a network of VARs and distributors. The Company sells its products in
the United States through large VARs such as Advanced Data Graphics, Inc.,
Avcom, Inc., Cad Research, Inc. and New Technologies Solutions, Inc.
Distributors include Pioneer-Standard Electronics, Inc. and Wyle Electronics in
the United States, Performance Graphics, Ltd. in Europe and Memorex Telex Japan,
Ltd. in Asia. Sales to VARs and distributors accounted for 43% of the Company's
revenues in 1996.
Marketing. The Company's marketing efforts consist primarily of advertising
in targeted trade publications, exhibiting at industry trade shows and joint
marketing activities with ISVs. The Company's collaborative marketing efforts
include mailings by the ISVs to their customers on the behalf of the Company and
inclusion of the Company's promotional literature with the ISVs software
distributions. The Company also participates in joint demonstrations, pilot
programs and seeks to obtain reviews of its products in leading trade
publications such as Pro/E The Magazine.
Customer Support. The Company utilizes Software Support Inc. ("SSI") for
initial support within the United States for VARs, distributors and end users.
SSI is an 800 person support organization which services companies such as
Gateway 2000 and Cisco Systems. The Company maintains its own in-house pre- and
post-sale support staff to provide support for the rest of the world, OEM
support and extended support for the United States. In addition, the Company
utilizes its Web site as well as e-mail exchange to support its customers. The
Company generally provides a three-year warranty for its product lines.
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RESEARCH AND DEVELOPMENT
Research and development expenses increased from $2.6 million in 1995 to
$2.7 million in 1996, representing 67% and 14% of revenues, respectively. The
Company believes that continued investment in research and development is
critical to the Company's success. The Company's research and development
organization consisted of 21 employees as of December 31, 1996.
The Company's hardware development efforts are focused on the design and
testing of new products incorporating advanced components into high performance
accelerators that make efficient use of the PCI bus, system BIOS architectures,
and graphic libraries. The hardware development team combines 2D and 3D graphic
processors, RAMDACS, graphic memory chips and firmware into integrated,
efficient graphics accelerators.
Software development efforts are focused on development of software and
firmware drivers to enhance the performance of applications, upgrades to the
Flying Carpet and AccelVIEW 3D applications and support for new graphics
accelerator chips that may be incorporated in future products. From time to
time, the Company also employs outside consultants to assist with the
development of specific projects.
The Company dedicates certain engineering personnel to its ISV partners to
optimize their applications with the Company's accelerator products. The
dedicated engineering personnel often work directly on-site with the ISV
engineering development team on development of the next generation of ISV
products. The Company also works with suppliers of graphics chip sets to specify
the next generation of requirements and components for the Company's new
products. The Company coordinates with leading personal computer and NT
workstation hardware and operating system vendors to remain abreast of emerging
industry trends and opportunities.
The markets for the Company's products are characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions and rapid product obsolescence. The Company's success will be
substantially dependent upon its ability to continue to develop and introduce
competitive products and technologies on a timely basis with features and
functionality that meet changing customer requirements. The Company's business
would be adversely affected if the Company were to incur delays in developing
new products or enhancements, or if such products or enhancements did not gain
widespread market acceptance. The Company's business would also be adversely
affected if it were to select new chipsets from among those chipsets offered by
its various semiconductor vendors, new chipsets that do not perform favorably on
a price-performance basis compared to competing products. In addition, there can
be no assurance that products or technologies developed by others will not
render the Company's products or technologies noncompetitive or obsolete. The
Company must continually assess emerging technologies and standards, and
evolving market needs, and must continually decide which technologies and
product directions to pursue. If the Company were to focus its efforts on
technologies, standards or products that do not meet emerging end user needs and
do not achieve market acceptance, the Company could miss one or more product
cycles. In such an event, the Company's business, financial conditions and
results of operations would be adversely affected.
MANUFACTURING
All manufacturing and testing is completed by major contract manufacturers
on a turnkey basis in Hong Kong, Taiwan, and Singapore. This enables the Company
to avoid the cost of owning and operating a manufacturing facility while adding
flexibility to the manufacturing process. The Company does not have contract
commitments with these subcontractors and therefore these subcontractors are not
obligated to supply assemblies, products or services to the Company for any
specific time or at any specific price, except as provided for by specific
purchase orders. Although at present there is an abundance of turnkey
manufacturing in the world, there is no guarantee this will continue. Some long
lead time and sole-sourced items are forecasted and purchased by the Company and
are sold to the turnkey vendor upon demand. Quality auditing and root cause
failure analysis are performed by the Company to maintain quality. The Company
negotiates with vendors for the best pricing on key components and assigns the
pricing to the subcontractors, while receiving the benefit of the
subcontractors' volume purchase prices on the more standard parts.
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The Company relies on subcontractors to manufacture, subassemble, test and
ship the Company's products. The Company relies on sole-source suppliers for
certain critical components, such as 3Dlabs for its graphics acceleration chips
and Nan Ya for its printed circuit boards. In addition, there is some limited
availability of application specific integrated circuit chipsets that provide
VRAM and DRAM memory. The Company procures its components and products through
purchase orders and does not have specific requirement agreements with any of
its subcontractors or suppliers. Each of the Company's subcontractors and
suppliers can cease supplying the services, products or components at any time
with no penalty. In the event it becomes necessary for the Company to replace a
key subcontractor or supplier, the Company could incur significant manufacturing
set-up costs and delays while new sources are located and alternate components
are integrated into the design of the Company's products. There can be no
assurance that the Company will be able to maintain its current subcontractor
and supplier relationships or that the Company will be able to find suitable
replacement subcontractors and suppliers, if necessary. Although the Company
maintains ongoing efforts to obtain required quantities of products, component
shortages may exist from time to time, and there can be no assurance that the
Company's current subcontractors and suppliers will continue to provide
sufficient quantities of suitable quality product components at acceptable
prices. The inability of the Company to obtain product components at their
historical cost levels would directly affect the cost of the Company's products.
In addition, the Company's ability to respond to greater than anticipated market
demand may be constrained by availability of services, products or components.
Further, one of the Company's subcontractors is located in Hong Kong. When Hong
Kong transitions to the authority of the Peoples' Republic of China, the Company
could experience disruption in the supply products from that subcontractor. The
loss of subcontractors or suppliers or the failure of subcontractors or
suppliers to meet the Company's price, quality, quantity and delivery
requirements would have a material adverse effect on the Company's business,
financial condition and results of operations.
PROPRIETARY RIGHTS
Although the Company has three patent applications filed in the United
States, these claims are not related to the Company's current product lines.
Instead, the Company relies exclusively on trade secret and copyright protection
for its proprietary technology. Despite the Company's precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company's
technologies without authorization or to develop competing technologies
independently. Furthermore, the laws of certain countries in which the Company
does business, including countries in which the Company does a significant
amount of business, such as the United Kingdom and Germany, may not protect the
Company's software and intellectual property rights to the same extent as the
laws of the United States. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology. If unauthorized
copying or misuse of the Company's products were to occur to any substantial
degree, or if a competitor of the Company were to effectively duplicate the
Company's proprietary technology, the Company's business, financial condition
and results of operations would be materially adversely affected. Furthermore,
while the Company requires employees and consultants to enter into
confidentiality agreements, there can be no assurance that proprietary
information will not be disclosed, that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its trade secrets. Certain technology used
by the Company's products is licensed from third parties, generally on a
non-exclusive basis. The termination of any such license, or the failure of any
third party licensor to adequately maintain or update its product, could result
in delay in the Company's ability to ship its products while it seeks to
implement technology offered by alternative sources, if any. Any required
replacement licenses could prove to be either unavailable or costly.
While the Company has not received notices from third parties alleging
infringement claims that the Company believes would have a material adverse
effect on the Company's business, there can be no assurance that third parties
will not claim that the Company's current or future products or manufacturing
processes infringe the proprietary rights of others. Any such claim, with or
without merit, could result in costly litigation or might require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
34
<PAGE> 36
agreements, if required, may not be available on terms acceptable to the
Company, or at all, which could have a material adverse effect upon the
Company's business, financial condition and results of operations.
COMPETITION
The market for 3D graphic accelerators is extremely competitive and subject
to rapid change. The Company expects competition to increase in the future from
existing competitors and from new market entrants with products that may be less
costly than the Company's products or provide better performance or additional
features not currently provided by the Company. The Company competes with the
following three major groups: professional 3D graphics board companies
(including Intergraph Corporation and Dynamic Pictures, Inc.), RISC/UNIX
workstation companies (including Sun and SGI) and traditional volume PC board
suppliers (including ELSA GmbH, Diamond Multimedia Systems, Inc. and Matrox
Electronic Systems Ltd.). A variety of potential actions by any of the Company's
competitors could have a material adverse effect on the Company's business,
financial condition and results of operations. Such actions may include
reduction of product prices, increased promotion, announcement or accelerated
introduction of new or enhanced products, product giveaways, product bundling or
other competitive actions.
Many of the companies that currently compete with the Company or that may
compete with the Company have longer operating histories and significantly
greater financial, technical, sales, marketing and other resources, as well as
greater name recognition and larger customer bases, than the Company. As a
result, these competitors may be able to respond more quickly and effectively to
new or emerging technologies and changes in customer requirements or to devote
greater resources to the development, promotion, sale and support of their
products than the Company. Consequently, the Company expects to continue to
experience increased competition, which could result in significant price
reductions, loss of market share and lack of acceptance of new products, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will be able to compete against current or future competitors successfully or
that competitive pressures faced by the Company will not have a material adverse
effect upon its business, financial condition and results of operations.
EMPLOYEES
As of December 31, 1996, the Company had 55 employees, including 20 in
sales, marketing and customer support, 21 in research and development and 14 in
finance and administration. None of the Company's employees are represented by a
labor union. The Company has not experienced work stoppages and believes it has
a good relationship with its employees. Competition for qualified personnel in
the industry in which the Company competes is intense. The Company believes that
its future success will depend in part on its continued ability to attract, hire
and retain qualified personnel. See "Risk Factors -- Dependence on Key
Personnel; Need to Attract and Retain Highly Skilled Personnel."
FACILITIES
The Company's principal facilities occupy approximately 13,000 square feet
in San Jose, California, pursuant to a lease which expires on March 31, 1998. In
addition, the Company occupies various sales and support facilities in Florida,
California and Wiesbaden, Germany. The Company believes its current facilities
are adequate to meet its needs through the next six months. The Company is
exploring various alternatives to house its planned expansion and believes that
additional facilities should be available on acceptable terms.
LEGAL PROCEEDINGS
There are no material pending or threatened legal proceedings against the
Company. The Company from time to time is involved in routine legal matters
incident to its business.
35
<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company, including their ages and
positions as of December 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------ --- -----------------------------------------------------
<S> <C> <C>
Jeffrey W. Dunn..................... 42 Chairman, President and Chief Executive Officer
Nancy E. Bush....................... 39 Vice President, Finance and Administration, Chief
Financial Officer, Assistant Secretary and Director
Stephen L. Bartlett................. 56 Vice President, Operations
Lew S. Epstein...................... 49 Vice President, Sales
Gregory C. Milliken................. 35 Vice President, Business Development
Niraj Swarup........................ 36 Vice President, Marketing
Keith H. Uhlin...................... 40 Vice President, Engineering
David E. Gold(1).................... 53 Director
Jos C. Henkens(1)(2)................ 44 Director
Shintaro Miyamoto................... 33 Director
David W. Pidwell(2)................. 49 Director
Peter L. Wolken(1)(2)............... 62 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Dunn co-founded the Company in November 1994 and serves as Chairman,
President and Chief Executive Officer. From February 1993 to December 1994, Mr.
Dunn was Vice President of Marketing at Kubota Graphics. From October 1988 to
January 1993, Mr. Dunn was Vice President of Worldwide Sales and Support for
Cygnet Systems, Inc., a manufacturer of robotic mass storage devices. Mr. Dunn
has also held sales and/or sales management positions at Xerox Corporation,
Avnet Computer Technologies, Inc. and Microcon Software Centers, Inc.
Ms. Bush co-founded the Company in November 1994 and serves as Chief
Financial Officer and Director and has been Vice President, Finance and
Administration and Assistant Secretary since December 1996. From January 1991 to
November 1994, Ms. Bush was employed with ATG Cygnet Inc., formerly Cygnet
Systems, Inc. Her positions at ATG Cygnet, Inc. included MIS Manager from
January 1991 to February 1992, Controller from February 1992 to October 1992,
Director of Finance from October 1992 to October 1993, Chief Financial Officer
and Vice President of Operations from October 1993 to September 1994 and Chief
Executive Officer from September 1994 to November 1994. In June 1993, Cygnet
Systems, Inc. declared Chapter 11 bankruptcy and became ATG Cygnet Inc. Prior to
1991, she held finance and manufacturing positions at Spectra Physics Inc. and
Corning Incorporated.
Mr. Bartlett joined the Company in July 1996 and was elected Vice
President, Operations in August 1996. From May 1993 to July 1995, Mr. Bartlett
was Director of Operations for Sigma Designs, Inc. From March 1991 to April
1993, Mr. Bartlett served as Vice President of Operations at Radius, Inc. and
from January 1988 to March 1991, he was Director of Operations for Radius, Inc.
Mr. Bartlett serves as Chairman for the Los Gatos Rowing Club.
Mr. Epstein joined the Company in August 1995 as Vice President, Sales.
From January 1994 to September 1995, Mr. Epstein was Vice President of Sales and
Support for Los Altos Technologies. From January 1993 to June 1994, he was Vice
President of Sales for Centric Engineering. From May 1990 to December 1992, Mr.
Epstein was Vice President of Sales and Support for Intergraph Corporation.
Mr. Milliken co-founded the Company and has been Vice President, Business
Development since December 1996. Mr. Milliken served as Vice President,
Marketing of the Company from 1994 to 1996. From March 1994 to July 1994, Mr.
Milliken served as Mechanical Industry Marketing Manager at Kubota
36
<PAGE> 38
Graphics and from July 1994 to November 1994, Mr. Milliken was a Director of
Product Marketing at Kubota Graphics. From January 1991 to February 1994, Mr.
Milliken was a Marketing Manager for Autodesk.
Mr. Swarup joined the Company in April 1996 as Director, Marketing and was
elected Vice President, Marketing in December 1996. Prior to joining
AccelGraphics, Mr. Swarup held various project manager and group marketing
manager positions at Sun from May 1990 to April 1996.
Mr. Uhlin joined the Company in November 1996 and was elected Vice
President, Engineering in December 1996. From September 1988 to November 1996,
Mr. Uhlin was Director of Advanced 3D Graphics for Cirrus Logic, Inc.
Mr. Gold has served as a director of the Company since June 1995. Since
February 1985, he has been a General Partner at Indosuez Ventures, a venture
capital firm. Mr. Gold is also a director of several private companies.
Mr. Henkens has served as a director of the Company since June 1995. Since
January 1983, Mr. Henkens has been associated with Advanced Technology Ventures,
a venture capital firm. Mr. Henkens is also a director of Actel Corporation,
Credence Systems Corporation, ParcPlace Digitalk, Inc. as well as a number of
private technology companies.
Mr. Miyamoto has served as director of the Company since October 1996. From
April 1985 to March 1992, Mr. Miyamoto served as Assistant Manager of Kubota.
Since April 1992, Mr. Miyamoto has been Manager of Kubota's U.S. office.
Mr. Pidwell has served as a director of the Company since February 1996.
Since March 1996, Mr. Pidwell has been a private investor in the Company. From
1987 to 1995, Mr. Pidwell founded and was President and Chief Executive Officer
of Rasna Corporation, a mechanical design automation software company. Mr.
Pidwell is also a director of several private technology companies.
Mr. Wolken has served as a director of the Company since June 1995. Since
July 1981, he has been cofounder and General Partner of AVI Management Partners
I, II and III, a venture capital firm. Mr. Wolken serves as a director of a
number of private technology companies and is a director of Qualix Group Inc.
TERM OF OFFICE OF DIRECTORS AND OFFICERS
The Company's Bylaws currently provide for a Board of Directors consisting
of seven members. All directors hold office until the next annual meeting of
stockholders or until their successors are duly elected and qualified. However,
the Company's Bylaws and Certificate of Incorporation provide that as of the
record date for the Company's first annual stockholders' meeting when the
Company is exempt from Section 2115 of the California Corporation Code, the
Board of Directors will be divided into three classes with the directors of each
class serving staggered terms. Assuming the Company is exempt from such Section
2115 as of the record date for the Company's 1998 annual stockholders' meeting,
the Class I directors will be Messrs. Gold and Miyamoto, whose current terms
will end on the annual stockholders meeting held in 1998, the Class II directors
are Messrs. Henkens and Wolken, whose current terms will end on the annual
stockholders meeting held in 1999, and the Class III directors are Ms. Bush and
Messrs. Dunn and Pidwell, whose current terms will end on the annual
stockholders meeting held in 2000. Upon the expiration of the term of each class
of directors, members constituting such class of directors will be elected for a
three-year term at the next succeeding annual meeting of stockholders. The Board
of Directors elects the Company's officers, and such officers serve at the
discretion of the Board of Directors of the Company. The current Board of
Directors was elected pursuant to an Amended and Restated Voting Agreement
between the Company and the holders of Preferred Stock of the Company which
terminates upon the consummation of this offering. The Amended and Restated
Voting Agreement contains certain minimum share holding requirements for these
seats. Currently, the members of the Board of Directors are not compensated for
their services.
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<PAGE> 39
COMMITTEES OF THE BOARD OF DIRECTORS
There are currently two standing committees of the Board of Directors, the
Audit Committee and the Compensation Committee. The Audit Committee reviews the
Company's annual audit and meets with the Company's independent auditors to
review the Company's internal controls and financial management practices. The
Board's Audit Committee currently consists of Messrs. Gold, Henkens and Wolken.
The Compensation Committee recommends compensation for certain of the Company's
personnel to the Board and, together with the Board of Directors, administers
the Company's stock and option plans. The Compensation Committee currently
consists of Messrs. Henkens, Pidwell and Wolken.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer and each of the other
four most highly compensated officers who were serving as officers on December
31, 1996 (the "Named Officers") whose aggregate annual compensation exceeded
$100,000 for the year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#)
- ---------------------------------------------------------- -------- ------- ------------
<S> <C> <C> <C>
Jeffrey W. Dunn........................................... $181,192 $27,599 65,500
Chairman, President and Chief Executive Officer
Nancy E. Bush............................................. 102,692 22,999 22,000
Vice President, Finance and Administration and Chief
Financial Officer
Lew S. Epstein............................................ 126,006 61,049 23,500
Vice President, Sales
Gregory C. Milliken....................................... 105,654 18,399 --
Vice President, Business Development
Ralph E. Nichols(1)....................................... 140,618 9,619 16,000
Vice President, Engineering
</TABLE>
- ---------------
(1) Includes $33,186 of consultancy fees which Mr. Nichols received from
September through December 1996. Mr. Nichols resigned as Vice President,
Engineering from the Company in September 1996. Mr. Keith Uhlin, the
Company's current Vice President, Engineering, began employment with the
Company in November 1996.
OPTION GRANTS IN 1996
The following table provides certain summary information concerning options
granted during the year ended December 31, 1996 to the Named Officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(2)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION -----------------
NAME GRANTED(#)(2) IN 1996 PER SHARE DATE 5% 10%
- --------------------------- ------------- ----------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey W. Dunn............ 65,500 9.06% $0.30 03/14/06 $12,358 $31,317
Nancy E. Bush.............. 22,000 3.04 0.30 03/14/06 4,151 10,519
Lew S. Epstein............. 16,000 2.21 0.30 03/14/06 3,109 7,650
7,500 1.04 0.30 05/23/06 1,415 3,586
Ralph E. Nichols........... 16,000 2.21 0.30 03/14/06 3,019 7,650
</TABLE>
38
<PAGE> 40
- ---------------
(1) Consists of stock options granted pursuant to the Company's 1995 Stock Plan.
The Company's options generally become exercisable at a rate of 12.5% after
six months following the date of grant and approximately 2% per month
thereafter, as long as the optionee remains an employee of or consultant to
the Company. The maximum term of each option granted is ten years from the
date of grant. The exercise price is equal to the fair market value of the
stock on the grant date as determined by the Board of Directors. See
"-- Stock Option and Incentive Plans."
(2) The 5% and 10% assumed compounded annual rates of stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock appreciation over the ten-year option
term will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the Common Stock appreciates over the option
term, no value will be realized from the option grants made to the persons
named in the Summary Compensation Table.
OPTION VALUES AT DECEMBER 31, 1996
The following table provides certain summary information concerning the
shares of Common Stock represented by outstanding stock options held by each of
the Named Officers as of December 31, 1996.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
SHARES AT DECEMBER 31, 1996(#) AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey W. Dunn........ -- -- 15,010 50,490 $ 120,080 $ 403,920
Nancy E. Bush.......... -- -- 5,041 16,959 40,328 132,650
Lew S. Epstein......... -- -- 30,967 73,158 250,961 591,714
Ralph E. Nichols....... 48,000 $ 10,080(2) 3,666 12,334 29,327 98,672
</TABLE>
- ---------------
(1) Calculated by multiplying the applicable number of shares by the difference
between the estimated fair value of the Company's Common Stock as of
December 31, 1996 ($8.30 per share) and the exercise price of the options.
(2) Calculated by multiplying the applicable number of shares by the difference
between the fair value of the Company's Common Stock as of the date of
exercise ($0.30 per share) and the exercise price of the exercised options.
STOCK OPTION AND INCENTIVE PLANS
1995 Stock Plan. The Company's 1995 Stock Plan (as amended, the "1995 Stock
Plan") was adopted by the Board of Directors and approved by the Company's
stockholders in December 1994. An aggregate of 3,300,000 shares of the Company's
Common Stock are reserved for issuance under the 1995 Stock Plan.
The 1995 Stock Plan provides for the granting to employees (including
officers and directors) of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code (the "Code"), for the granting to
employees, consultants and nonemployee directors of nonstatutory stock options
and for the granting to employees of stock purchase rights. The 1995 Stock Plan
may be administered by the Board of Directors or a committee of the Board (the
"1995 Administrator"). The 1995 Administrator determines the terms of options
and stock purchase rights granted under the 1995 Stock Plan, including the
number of shares subject to the option or right, exercise price, term and
exercisability. The maximum number of shares which may be subject to options or
stock purchase rights granted to any one employee under the 1995 Stock Plan for
any fiscal year of the Company is 500,000. The exercise price of all options
granted under the 1995 Stock Plan must be at least equal to the fair market
value of the Common Stock of the Company on the date of grant. The exercise
price of any option granted to an optionee who owns stock representing more than
10% of the voting power of the Company's outstanding capital stock must equal at
least 110% of the fair market value of the Common Stock on the date of grant.
The minimum purchase price of shares acquired by exercising stock purchase
rights is 85% of the fair market value of the Common Stock on the date of grant.
Payment of the
39
<PAGE> 41
exercise price may be made in cash, promissory notes, shares or other
consideration determined acceptable by the 1995 Administrator. With respect to
any participant who owns stock possessing more than 10% of the voting power of
all classes of stock of the Company, the maximum term of an incentive stock
option must not exceed five years. The term of all other options must not exceed
ten years.
If the Company consolidates or merges with or into another corporation,
then each option will be either assumed or an equivalent option substituted by
the successor corporation or, if not assumed or substituted, the unvested
portion of each option will be accelerated. If not terminated earlier, the 1995
Stock Plan will terminate in 2005. The 1995 Administrator has the authority to
amend or terminate the 1995 Stock Plan as long as such action does not adversely
affect any outstanding option.
1997 Employee Stock Purchase Plan. The Company's 1997 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
January 1997 and will be submitted for approval by the Company's stockholders in
March 1997. An aggregate of 400,000 shares of the Company's Common Stock are
reserved for issuance under the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of overlapping offering periods of 12
months' duration, with new offering periods other than the first offering period
commencing on or about February 1 and August 1 of each year. Each offering
period will consist of two consecutive purchase periods of six months duration
with the last day of such period being designated a purchase date. The initial
offering period is expected to commence on the date of this offering with the
first purchase date occurring on January 31, 1998 and subsequent purchase dates
to occur every six months thereafter. The Purchase Plan will be administered by
the Board of Directors or by a committee appointed by the Board. Employees
(including officers and employee directors) of the Company, or of any
majority-owned subsidiary designated by the Board, are eligible to participate
in the Purchase Plan if they are employed by the Company or any such subsidiary.
The Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 10% of an employee's compensation, at a
price equal to the lower of 85% of the fair market value of the Company's Common
Stock at the beginning of the offering period or on the purchase date. Employees
may end their participation in the offering at any time during the offering
period, and participation ends automatically on termination of employment with
the Company.
The Purchase Plan provides that in the event of a merger of the Company
with or into another corporation or a sale of substantially all of the Company's
assets, each right to purchase stock under the Purchase Plan will be assumed or
an equivalent right substituted by the successor corporation, unless the Board
of Directors shortens the offering period so that employees' rights to purchase
stock under the Purchase Plan will be exercised prior to the merger or sale of
assets. The Board of Directors has the power to amend or terminate the Purchase
Plan as long as such action does not adversely affect any outstanding rights to
purchase stock thereunder. If not terminated earlier, the Purchase Plan will
have a term of twenty years.
1997 Directors' Stock Option Plan. The 1997 Directors' Stock Option Plan
(the "Directors' Plan") was adopted by the Board of Directors in January 1997
and will be submitted for approval by the Company's stockholders in March 1997.
An aggregate of 200,000 shares of the Company's Common Stock are reserved for
issuance under the Directors' Plan. The Directors' Plan provides for the grant
of nonstatutory stock options to nonemployee directors of the Company. The
Directors' Plan is designed to work automatically without administration;
however, to the extent administration is necessary, it will be performed by the
Board of Directors. To the extent they arise, it is expected that conflicts of
interest will be addressed by abstention of the interested director from both
deliberations and voting regarding matters in which he or she has a personal
interest.
The Directors' Plan provides that each person who is or becomes a
nonemployee director of the Company will be granted a nonstatutory stock option
to purchase 15,000 shares of Common Stock (the "First Option") on the date on
which the optionee first becomes a nonemployee director of the Company or, for
current directors, on the date of this offering. After the first option grant,
on the date of each annual meeting, each nonemployee director shall be granted
an additional option to purchase 5,000 shares of Common Stock (a
40
<PAGE> 42
"Subsequent Option") if, on such date, he or she has served on the Company's
Board of Directors for at least six months.
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any grant and the method of
making a grant. No option granted under the Directors' Plan is transferable by
the optionee other than by will or the laws of descent or distribution, and each
option is exercisable, during the lifetime of the optionee, only by such
optionee. The Directors' Plan provides that the First Option shall become
exercisable in installments as to 33 1/3% of the total number of shares subject
to the First Option on each of the first, second and third anniversaries of the
date of grant of the First Option, and each Subsequent Option shall become
exercisable in full on the third anniversary of the date of grant of such
Subsequent Option. If a nonemployee director ceases to serve as a director for
any reason, he or she may, but only within 60 days after the date he or she
ceases to be a director of the Company, exercise options granted under the
Directors' Plan to the extent that he or she was entitled to exercise such
options at the date of such termination. To the extent he or she was not
entitled to exercise any such option at the date of such termination, or if he
or she does not exercise such option (which he or she was entitled to exercise),
within such 60 day period, such option will terminate. The exercise price of all
stock options granted under the Directors' Plan will equal the fair market value
of a share of the Common Stock on the date of grant of the option. Options
granted under the Directors' Plan have a term of ten years.
In the event of a merger of the Company with or into another corporation or
a sale of substantially all of the Company's assets, the unvested portion of
each option will be accelerated. The Board of Directors may amend or terminate
the Directors' Plan; provided, however, that no such action may adversely affect
any outstanding option, and the provisions regarding the grant of options under
the Directors' Plan may be amended only once in any six-month period, other than
to conform with changes in the Code. If not terminated earlier, the Directors'
Plan will have a term of ten years.
401(k) Savings & Retirement Plan. The Company's tax deferred savings plan
(the "401(k) Plan") was adopted by the Board of Directors in December 1994. The
401(k) Plan is intended to qualify under Section 401 of the Code, so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on contributions, are generally not taxable to employees until withdrawn
from the 401(k) Plan. The 401(k) Plan covers all employees of the Company.
Employees may elect to defer, in the form of contributions to the 401(k) Plan,
between 1% and 20% of their pre-tax compensation; however, the amount deferred
may not exceed the statutorily prescribed annual limit. The 401(k) Plan permits
matching contributions to be made to the 401(k) Plan by the Company on behalf of
employees. Contributions are allocated to each employee's individual account,
which is invested in selected mutual funds or a guaranteed income fund according
to the directions of the employee.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation and Bylaws require the Company
to indemnify its directors and officers against any damages arising from their
actions as an agent of the Company to the fullest extent permitted by Delaware
law. The Bylaws further provide that the Company may similarly indemnify its
other employees and agents. In addition, each director has entered into an
indemnification agreement with the Company, pursuant to which the Company has
agreed to indemnify such director to the fullest extent permitted by Delaware
law.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification would
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which might result in a claim for such indemnification.
41
<PAGE> 43
CERTAIN TRANSACTIONS
The Company entered into an Asset Purchase Agreement dated as of December
9, 1994 with Kubota Graphics pursuant to which the Company purchased certain
assets of Kubota Graphics for the sum of $1.2 million (the "Asset Acquisition").
In connection with the Asset Acquisition, the Company entered into a Convertible
Note Purchase Agreement dated as of December 22, 1994, with Kubota, the parent
corporation of Kubota Graphics, pursuant to which the Company issued Kubota a
subordinated convertible promissory note carrying an initial principal amount of
$3.3 million (the "Convertible Note"). Mr. Miyamota, a director of the Company,
is an affiliate of Kubota.
In June and July 1995, the Company issued an aggregate of 3,446,997 shares
of Series A Preferred Stock at a price per share of $1.67 to investors that
included, among others, Advanced Technology Ventures IV (750,000 shares), AVI
Capital, L.P. and its affiliated entities (749,997 shares), STF II, L.P.
(600,000 shares) and Woodside Fund III, L.P. (300,000 shares). In connection
with this financing, Kubota converted $1,650,000 of the outstanding principal on
the Convertible Note into 990,000 shares of Series A Preferred Stock.
In March 1996, the Company issued an aggregate of 1,061,660 shares of
Series B Preferred Stock at a per share price of $3.00 to investors that
included, among others, Asset Management Associates (333,333 shares), Kubota
(162,750 shares), Woodside Fund III, L.P. (132,652 shares), Advanced
Technologies Ventures IV, L.P. (123,295 shares), AVI Capital, L.P. and
affiliated entities (123,295 shares) and STF II, L.P. (98,636 shares).
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and affiliates
will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested directors on the Board of Directors, and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
42
<PAGE> 44
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of December 31, 1996, and as adjusted to
reflect the sale by the Company of the shares of Common Stock offered by this
Prospectus, (i) by each person who is known by the Company to beneficially own
5% or more of the Common Stock, (ii) by each of the Company's directors and
Named Officers, (iii) by all current executive officers and directors as a group
and (iv) by the Selling Stockholders. Unless otherwise indicated below, to the
knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their shares of Common Stock, except to the
extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OWNED AFTER THE
THE OFFERING OF SHARES OFFERING(1)(2)
EXECUTIVE OFFICERS, DIRECTORS --------------------- BEING ---------------------
AND 5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Kubota Corporation....................... 1,152,750 20.0% 113,464 1,039,286 13.2%
2372-A Qume Drive
San Jose, CA 95131
Advanced Technology Ventures IV, L.P..... 873,295 15.2 85,958 787,337 10.0
485 Ramona Street, Suite 200
Palo Alto, CA 94301
AVI Capital L.P. (and related
entities)(3)........................... 873,292 15.2 85,958 787,334 10.0
One First Street, Suite 12
Los Altos, CA 94022
STF II, L.P.............................. 698,636 12.1 69,864 628,772 8.0
c/o Indosuez Ventures
2180 Sand Hill Road, Suite 450
Menlo Park, CA 94025
Woodside Fund III, L.P................... 432,652 7.5 -- 432,652 5.5
850 Woodside Drive
Woodside, CA 94062
Asset Management Associates 1996, L.P.... 333,333 5.8 33,333 300,000 3.8
2275 East Bayshore Road, Suite 150
Palo Alto, CA 94303
Shintaro Miyamoto(4)..................... 1,152,750 20.0 113,464 1,039,286 13.2
Jos C. Henkens(5)........................ 873,295 15.2 85,958 787,337 10.0
Peter L. Wolken(6)....................... 873,292 15.2 85,958 787,334 10.0
David E. Gold(7)......................... 698,636 12.1 69,864 628,772 8.0
David W. Pidwell(8)...................... 24,166 * -- 24,166 *
50628 Vickery Lane
Saratoga, CA 95070
Jeffrey W. Dunn(9)....................... 478,989 8.3 23,064 455,925 5.8
Gregory C. Milliken(10).................. 220,312 3.8 11,015 209,297 2.7
Nancy E. Bush(11)........................ 148,458 2.6 7,125 141,333 1.8
Lew S. Epstein(12)....................... 43,639 * 5,622 38,017 *
Niraj Swarup(13)......................... 16,046 * 3,000 13,046 *
Stephen L. Bartlett(14).................. 12,395 * -- 12,395 *
Keith H. Uhlin........................... -- * -- -- *
All executive officers and directors as a
group (12 persons)(15)................. 4,541,978 77.6 405,070 4,136,908 51.7
OTHER SELLING STOCKHOLDERS
John O. Burness.......................... 67,000 1.2 3,375 64,125 *
John J. Caravello........................ 86,250 1.5 4,312 81,938 1.1
Other Selling Stockholders each
beneficially owning less than 1% of the
Company's Common Stock (14
persons)(16)........................... 69,335 1.2 8,910 60,425 *
</TABLE>
- ---------------
* Less than 1%.
43
<PAGE> 45
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of shares, the
Common Stock options held by that person that are currently exercisable, or
become exercisable within 60 days following December 31, 1996, are deemed
outstanding. However, such shares are not deemed outstanding for purposes
of computing the percentage ownership of any other person.
(2) Assumes that the Underwriters' over-allotment option to purchase up to
390,000 shares from the Company and the Selling Shareholders is not
exercised. If the Underwriters' over-allotment option is exercised in full,
the Company will sell an additional 270,593 shares, and the Selling
Stockholders will sell an additional 119,407 shares in the aggregate.
(3) Includes 127,936 shares held by Associated Ventures Investors II, L.P.,
24,911 shares held by AVI Partners Growth Fund, L.P. and 9,119 shares held
by AVI Silicon Valley Partners, L.P.
(4) Represents 1,152,750 shares held by Kubota Corporation, which Mr. Miyamoto
may be deemed to beneficially own by virtue of his status as Chief
Financial Officer of Kubota Corporation. Mr. Miyamoto disclaims beneficial
ownership of the shares held by such entity. Mr. Miyamoto is a director of
the Company.
(5) Represents 873,295 shares held by Advanced Technology Ventures IV, L.P.,
which Mr. Henkens may be deemed to beneficially own by virtue of his status
as a General Partner of Advanced Technology Ventures, a General Partner of
Advanced Technology Ventures IV, L.P. Mr. Henkens disclaims beneficial
ownership of the shares held by such entity except to the extent of his
proportionate partnership interest therein. Mr. Henkens is a director of
the Company.
(6) Represents 711,326 shares held by AVI Capital, L.P., 127,936 shares held by
Associated Ventures Investors II, L.P., 24,911 shares held by AVI Partners
Growth Fund, L.P. and 9,119 shares held by AVI Silicon Valley Partners,
L.P., which Mr. Wolken may be deemed to beneficially own by virtue of his
status as General Partner of AVI Management Partners, General Partner of
each of the listed AVI funds. Mr. Wolken disclaims beneficial ownership of
the shares held by such entities except to the extent of his proportionate
partnership interests therein. Mr. Wolken is a director of the Company.
(7) Represents 698,636 shares held by STF II, L.P., which Mr. Gold may be
deemed to beneficially own by virtue of his status as General Partner of
Indosuez Ventures, a General Partner of STF II, L.P. Mr. Gold disclaims
beneficial ownership of the shares held by such entity except to the extent
of his proportionate partnership interest therein. Mr. Gold is a director
of the Company.
(8) Includes 16,666 shares held by both the Pidwell Family Living Trust Dated
6/25/87 and 7,500 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1996. Mr. Pidwell is a director of the
Company.
(9) Includes 450,000 shares held by both Jeffrey W. Dunn and Susan M. Dunn, as
trustees of the Jeffrey W. Dunn and Susan M. Dunn Trust Agreement dated
August 30, 1996. Also includes 11,250 shares held by Mr. Dunn's minor
children and 17,739 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1996. Also includes 53,333 shares held by
the Leo Dunn -- Family Share, John J. Yagjian et. al. Trustees, Agreement
dated 3/28/91 (the "Trust") which Mr. Dunn may be deemed to beneficially
own by virtue of his interest in the trust. Mr. Dunn disclaims beneficial
ownership of the shares held by such trust except to the extent of his
proportionate interest therein. Mr. Dunn is Chairman, President and Chief
Executive Officer of the Company.
(10) Mr. Milliken is Vice President, Business Development of the Company.
(11) Includes 5,958 shares issuable upon exercise of options exercisable within
60 days of December 31, 1996. Ms. Bush is Vice President, Finance and
Administration, Chief Financial Officer, Assistant Secretary and Director
of the Company.
(12) Includes 35,306 shares issuable upon exercise of options exercisable within
60 days of December 31, 1996. Mr. Epstein is Vice President, Sales of the
Company.
(13) Represents 16,046 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1996. Mr. Swarup is Director, Marketing of
the Company.
44
<PAGE> 46
(14) Represents 12,395 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1996.
(15) Includes 3,597,973 shares beneficially owned by entities affiliated with
Messrs. Gold, Henkens, Miyamoto, Pidwell and Wolken for which they disclaim
beneficial ownership of the shares held by such entities except to the
extent of their proportionate partnership interests therein. Also includes
94,944 shares issuable upon exercise of options exercisable within 60 days
of December 31, 1996.
(16) Includes an aggregate of 16,352 shares issuable pursuant to currently
exercisable options.
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, par value $0.001 per
share, and 2,000,000 shares of undesignated Preferred Stock, par value $0.001
per share, after giving effect to the Company's reincorporation in Delaware and
the amendment and restatement of the Company's Certificate of Incorporation to
delete references to the Series A Preferred Stock and Series B Preferred Stock
and increase the authorized number of shares of Common Stock, which will occur
upon conversion of such Preferred Stock into Common Stock upon the closing of
this offering.
COMMON STOCK
As of December 31, 1996, there were 5,761,307 shares of Common Stock
outstanding that were held of record by approximately 52 stockholders (as
adjusted to reflect the conversion of all outstanding shares of the Company's
Series A Preferred Stock and Series B Preferred Stock into Common Stock at a
one-to-one ratio upon the completion of this offering). Stock options to
purchase an aggregate of 1,006,867 shares of Common Stock were outstanding as of
December 31, 1996. Warrants to purchase an aggregate of 63,250 shares of
Preferred and Common Stock were also outstanding (as adjusted to reflect the
conversion of all outstanding shares of Preferred Stock). There will be
7,906,307 shares of Common Stock outstanding (assuming no exercise outstanding
warrants or the Underwriters' over-allotment option or exercise of outstanding
options under the Company's stock and option plans after December 31, 1996)
after giving effect to the sale of the shares of Common Stock to the public
offered hereby at an estimated offering price of $11.00 per share.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and satisfaction of preferential rights
of any outstanding Preferred Stock. The Common Stock has no preemptive or
conversion rights or other subscription rights and there are no redemption or
sinking fund provisions available to the Common Stock. The outstanding shares of
Common Stock are, and the shares of Common Stock to be issued upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon completion of this offering, the Board of Directors will be authorized
to issue 2,000,000 shares of undesignated Preferred Stock in one or more series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock may
have the effect of delaying, deterring or preventing a change in control of the
Company without further action by
45
<PAGE> 47
the stockholders. The issuance of Preferred Stock with voting and conversion
rights may adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others. At present, the Company has no
plans to issue any shares of Preferred Stock. See "Risk Factors -- Blank Check
Preferred Stock; Anti-Takeover Provisions."
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 4,177,708 shares of Common Stock or warrants exercisable for
Common Stock (the "Registrable Securities") or their transferees are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. These rights are provided under the terms of an investors'
rights agreement (the "Rights Agreement") between the Company and the holders of
Registrable Securities. The holders of at least 40% of the Registrable
Securities may require, on two occasions at any time after six months following
the effective date of this offering, that the Company use its best efforts to
register the Registrable Securities for public resale; provided, among other
limitations, that the proposed aggregate selling price, prior to deductions for
underwriting discounts and commissions, is at least $7.5 million. The Company
may delay such registration by up to 90 days if the Company's Board of Directors
determines that it would be seriously detrimental to the Company and its
stockholders to file such registration statement. If the Company registers any
of its Common Stock either for its own account or for the account of other
security holders, the holders of Registrable Securities are entitled to include
their shares of Common Stock in the registration. A holder's right to include
shares is subject to certain conditions and limitations, including lock-up
agreements restricting the sale of such shares for 180 days after the effective
date of the registration statement filed in connection with this offering and
the right of the underwriters to limit the number of shares included in such
registration. Holders of Registrable Securities may also require the Company, on
no more than one occasion over any 12-month period, to register all or a portion
of their Registrable Securities on Form S-3 when use of such form becomes
available to the Company, provided, among other limitations, that the proposed
aggregate selling price for shares offered thereby is at least $500,000. The
right of holders of Registrable Securities to have such shares registered on
Form S-3 is subject to the right of the underwriters participating therein to
limit the number of shares included in such registration. The Company may delay
such registration on Form S-3 by up to 90 days if the Company's Board of
Directors determines that it would be seriously detrimental to the Company and
its stockholders to file such registration statement. Subject to certain
limitations contained in the Rights Agreement, all fees, costs and expenses of
registrations effected pursuant to the Rights Agreement must be borne by the
Company and all selling expenses (including underwriting discounts and selling
commissions) relating to Registrable Securities must be borne by the holders of
the securities being registered.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
The Company's Certificate of Incorporation provides that any action
required or permitted to be taken by the stockholders of the Company may be
taken only at a duly called annual or special meeting of the stockholders and
eliminates cumulative voting in the election of directors upon qualification of
the Company as a "listed corporation," as defined in Section 301.5(d) of the
California Corporations Code (a "Listed Corporation"). The Certificate of
Incorporation and Bylaws also restrict the right of stockholders to change the
size of the Board of Directors and to fill vacancies on the Board of Directors.
The Bylaws also establish procedures, including advance notice procedures, with
regard to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors or for stockholder proposals
to be submitted at stockholder meetings. In addition, the Company's Certificate
of Incorporation provides that the Board of Directors is divided into three
classes of directors, with each class serving a staggered three-year term, as of
the record date of the Company's first annual stockholders' meeting when the
Company is exempt from Section 2115 of the California Corporations Code. A
classified board may maintain the incumbency of the Board of Directors, as it
generally makes it more difficult for stockholders to replace a majority of the
directors. The amendment of any of these provisions requires approval by holders
of 66.67% or more of the outstanding Common Stock. The Certificate of
Incorporation also authorizes the issuance of up to 2,000,000 shares of
Preferred Stock. The rights of the holders of the Common Stock will be subject
to, and may be subordinated to, the rights of the holders of any Preferred Stock
that may be issued in the future and, as a
46
<PAGE> 48
result, the issuance of such Preferred Stock could have a material adverse
effect on the market value of the Common Stock. The Company has no present plan
to issue shares of Preferred Stock.
These and other provisions of the Company's charter documents could have
the effect of making it more difficult for a third party to effect a change in
the control of the Board of Directors and therefore may discourage another
person or entity from making a tender offer for the Company's Common Stock,
including offers at a premium over the market price of the Common Stock, and
might result in a delay in changes in control of management. In addition, these
provisions could have the effect of making it more difficult for proposals
favored by the stockholders to be presented for stockholder consideration.
The Company has also included in its Certificate of Incorporation
provisions to eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware Law and to indemnify its directors and officers to the fullest
extent permitted by Section 145 of the Delaware Law.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporate Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder unless (with certain exceptions) the
business combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale or other transaction
resulting in a financial benefit to the stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's outstanding
voting stock. This provision may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders. In addition, upon completion of this offering, certain provisions
of the Company's charter documents, including a provision eliminating the
ability of stockholders to take actions by written consent, may have the effect
of delaying or preventing changes in control or management of the Company, which
could have an adverse effect on the market price of the Company's Common Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Harris Trust and
Savings Bank. Its address is 601 South Figueroa Street, Suite 4900, Los Angeles,
CA 90017, and its telephone number is (213) 239-0600.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
7,906,307 shares of Common Stock, assuming no exercise of options or warrants
after December 31, 1996. Of these shares, 2,600,000 shares (assuming no exercise
of the underwriters' over-allotment option) will be freely tradable without
restriction or further registration under the Securities Act unless purchased by
"affiliates" of the Company as that term is defined in Rule 144 of the
Securities Act. The remaining 5,306,307 shares will be "restricted securities"
as that term is defined under Rule 144 (the "Restricted Shares"). Sales of
Restricted Shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the Common Stock.
4,106,767 shares of Common Stock (including approximately 353,811 shares
issuable upon exercise of vested options) will be eligible for sale after
expiration of a contractual lock-up beginning 181 days after the effective date
of the Registration Statement containing this Prospectus, unless earlier
released, in whole or in part, by Cowen & Company. In addition, at various times
after 181 days from the date of this Prospectus, 1,591,932 shares will become
eligible for sale in the public market upon expiration of their respective
two-year holding periods, subject to certain volume and resale restrictions set
forth in Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of one percent of the number of
shares of Common Stock then outstanding or the average weekly trading volume of
the Common Stock as reported
47
<PAGE> 49
through the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an "affiliate" of the Company at any time
during the 90 days preceding a sale and who has beneficially owned for at least
three years the shares proposed to be sold would be entitled to sell such shares
under Rule 144(k) without regard to the requirements described above. The
Securities and Exchange Commission has recently proposed to reduce the Rule 144
holding periods. If enacted, such proposal will have a material effect on the
timing of when Restricted Shares become eligible for resale.
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule 144.
The Company intends to register on a Form S-8 registration statement under the
Securities Act, during the 180-day lockup period, (i) assuming no exercise of
options after December 31, 1996, a total of 1,006,867 shares of Common Stock
issuable upon exercise of outstanding options under the 1995 Stock Plan, (ii)
1,909,536 shares reserved for issuance under the 1995 Stock Plan, (iii) 200,000
shares of Common Stock reserved for issuance under the 1997 Directors' Plan and
(iv) 400,000 shares of Common Stock reserved for issuance under the 1997
Employee Purchase Plan. Such registration will permit the resale of shares so
registered by non-affiliates in the public market without restriction under the
Securities Act.
After this offering, the holders of 4,177,708 shares of Common Stock
(assuming exercise of outstanding warrants for 63,250 shares of Common Stock)
are entitled to certain demand and piggyback rights with respect to registration
of such shares under the Securities Act. See "Description of Capital
Stock -- Registration Rights of Certain Holders." Registration of such shares
under the Securities Act would result in such shares becoming freely tradable
without restriction under the Securities Act (except for shares purchased by
affiliates of the Company) immediately upon the effectiveness of such
registration. If such holders, by exercising their demand registration rights,
cause securities to be registered and sold in the public market, such sales
could have an adverse effect on the market price for the Company's Common Stock.
If the Company were to include in a Company initiated registration any
Registrable Securities pursuant to the exercise of piggyback registration
rights, such sales may have an adverse effect on the Company's ability to raise
needed capital or the cost thereof.
48
<PAGE> 50
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Cowen &
Company, Robertson, Stephens & Company LLC and SoundView Financial Group, Inc.
are acting as representatives (the "Representatives"), has severally agreed to
purchase from the Company and the Selling Stockholders the respective number of
shares of Common Stock set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Cowen & Company...........................................................
Robertson, Stephens & Company LLC.........................................
SoundView Financial Group, Inc............................................
---------
Total........................................................... 2,600,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the shares of Common Stock offered
hereby (other than those covered by the over-allotment option described below),
if any such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public initially at the public offering price set forth on the cover page of
this Prospectus and in part to certain dealers at such price less a concession
not in excess of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the Representatives. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any are taken.
The Company and the Selling Stockholders have granted to the Underwriters
an option, exercisable for up to 30 days after the date of this Prospectus, to
purchase up to an aggregate of 390,000 additional shares of Common Stock to
cover over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them as shown in the foregoing table bears to the
2,600,000 shares of Common Stock offered hereby. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the shares of Common Stock offered hereby.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
The Company, the Selling Stockholders, the Company's officers and directors
and certain of the Company's stockholders and optionholders have agreed, subject
to certain limited exceptions, not directly or indirectly, to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
any right to acquire Common Stock for
49
<PAGE> 51
a period of 180 days after the date of this Prospectus without the prior written
consent (which consent may be given, without notice to the Company's
stockholders or other public announcement) of Cowen & Company. Cowen & Company
has advised the Company that it has no present intention of releasing any of the
Company's stockholders or optionholders from such lock-up agreements until the
expiration of such 180-day period. See "Shares Eligible for Future Sale."
The Representative have advised the Company that the Underwriters do not
intend to confirm sales in excess of 5% of the shares offered hereby to any
account over which they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price will be
determined by negotiation between the Company and the Representatives. Among the
factors to be considered in such negotiations will be the prevailing market
conditions, the results of operations of the Company in recent periods, the
market capitalizations and stages of development of other companies that the
Company and the Representatives believe to be comparable to the Company, the
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Venture Law Group, A Professional Corporation, Menlo Park,
California. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Morrison & Foerster LLP, San Francisco,
California. As of the date of this Prospectus, certain attorneys at Venture Law
Group, including Michael W. Hall, the Company's Secretary and a Director of
Venture Law Group and certain affiliated partnerships beneficially own an
aggregate of 20,798 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of AccelGraphics, Inc. as of December
31, 1995 and 1996 and for the years then ended included in this Prospectus have
been so included in reliance upon the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form SB-2
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Certain items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and, in each instance, if such contract or
document is filed as an exhibit, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, NY 10048, and copies of all or any part thereof
may be obtained from such office after payment of fees prescribed by the
Commission. The Registration Statement is also available through the
Commission's Website on the World Wide Web at the following address:
http://www.sec.gov.
50
<PAGE> 52
ACCELGRAPHICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheet as of December 31, 1995 and 1996........................... F-3
Consolidated Statement of Operations for the years ended December 31, 1995 and 1996... F-4
Consolidated Statement of Stockholders' Deficit for the years ended December 31, 1995
and 1996............................................................................ F-5
Consolidated Statement of Cash Flows for the years ended December 31, 1995 and 1996... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 53
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of AccelGraphics, Inc.
The reincorporation and reverse stock split described in Note 1 to the
consolidated financial statements have not been consummated at February 6, 1997.
When they have been consummated, we will be in a position to furnish the
following report:
"In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders' deficit and
of cash flows present fairly, in all material respects, the financial
position of AccelGraphics, Inc. and its subsidiary at December 31, 1995 and
1996, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
January 30, 1997
F-2
<PAGE> 54
ACCELGRAPHICS, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
----------------- DECEMBER 31,
1995 1996 1996
------ ------ ------------
(UNAUDITED)
(NOTE 1)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $1,373 $2,979
Accounts receivable, net of allowances of $45 and $495..... 1,084 4,392
Inventories................................................ 1,011 507
Prepaid expenses........................................... 48 49
------ ------
Total current assets............................... 3,516 7,927
Property and equipment, net.................................. 435 512
------ ------
$3,951 $8,439
====== ======
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease obligation................ $ -- $ 16
Accounts payable........................................... 502 1,466
Accrued liabilities........................................ 426 1,123
Customer advances.......................................... 58 292
------ ------
Total current liabilities.......................... 986 2,897
------ ------
Capital lease obligation, net of current portion............. -- 34
------ ------
Subordinated convertible note payable to related party....... 1,748 1,748
------ ------
Mandatorily redeemable convertible preferred stock........... 5,745 8,930 $ --
------ ------ ------
Commitments (Note 8)
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value, 10,000 shares authorized
actual; 2,000 shares authorized, none issued and
outstanding pro forma................................... -- -- --
Common Stock, $0.001 par value, 50,000 shares authorized;
1,071 and 1,253 shares issued and outstanding actual;
5,761 shares issued and outstanding pro forma........... 1 1 6
Additional paid-in capital................................. 80 785 9,710
Notes receivable from stockholders......................... (75) (89) (89)
Deferred stock compensation................................ -- (396) (396)
Cumulative translation adjustment.......................... -- (5) (5)
Accumulated deficit........................................ (4,534) (5,466) (5,466)
------ ------ ------
Total stockholders' equity (deficit)............... (4,528) (5,170) $3,760
======
------ ------
$3,951 $8,439
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 55
ACCELGRAPHICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Revenues................................................................. $ 3,911 $18,671
Cost of revenues......................................................... 2,501 12,077
------- -------
Gross profit........................................................... 1,410 6,594
------- -------
Operating expenses:
Research and development............................................... 2,618 2,663
Sales and marketing.................................................... 2,154 3,635
General and administrative............................................. 1,039 1,131
------- -------
Total operating expenses............................................ 5,811 7,429
------- -------
Loss from operations..................................................... (4,401) (835)
Interest expense......................................................... (183) (145)
Other income, net........................................................ 119 48
------- -------
Net loss................................................................. $(4,465) $ (932)
======= =======
Pro forma net loss per share (unaudited) (Note 1)........................ $ (0.15)
=======
6,272
Shares used in pro forma per share calculation (unaudited) (Note 1)...... =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 56
ACCELGRAPHICS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES TOTAL
COMMON STOCK ADDITIONAL RECEIVABLE DEFERRED CUMULATIVE ACCUM- STOCK-
----------------- PAID-IN FROM STOCK TRANSLATION ULATED HOLDERS'
SHARES AMOUNTS CAPITAL STOCKHOLDERS COMPENSATION ADJUSTMENT DEFICIT DEFICIT
------ ------- ---------- ------------ ------------ ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994.................... 910 $ 1 $ 60 $(55) $ - $ - $ (69) $ (63)
Common Stock options
exercised............... 202 - 31 (20) - - - 11
Repurchase of Common
Stock................... (41) - (11) - - - - (11)
Net loss.................. - - - - - - (4,465) (4,465)
--
----- ---- ---- ----- --- ------- -------
Balance at December 31,
1995.................... 1,071 1 80 (75) - - (4,534) (4,528)
Common stock options
exercised............... 129 - 23 (13) - - - 10
Repayment of stockholder
loan.................... - - - 2 - - - 2
Interest on notes
receivable.............. - - - (3) - - - (3)
Deferred compensation
related to stock
options................. - - 608 - (608) - - -
Stock issued in exchange
for services............ 53 - 74 - - - - 74
Amortization of deferred
compensation............ - - - - 212 - - 212
Translation adjustment.... - - - - - (5) - (5)
Net loss.................. - - - - - - (932) (932)
--
----- ---- ---- ----- --- ------- -------
Balance at December 31,
1996.................... 1,253 $ 1 $785 $(89) $ (396) $(5) $(5,466) $(5,170)
===== == ==== ==== ===== === ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 57
ACCELERGRAPHICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
-------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................... $(4,465) $ (932)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................. 158 228
Stock compensation expense and other.......................... 98 283
Changes in assets and liabilities:
Accounts receivable......................................... (1,084) (3,308)
Inventories................................................. (130) 504
Prepaid expenses............................................ 20 (1)
Accounts payable............................................ 340 964
Accrued liabilities......................................... 426 697
Customer advances........................................... 58 234
------- -------
Net cash used in operating activities.................... (4,579) (1,331)
------- -------
Cash flows from investing activities:
Acquisition of property and equipment............................ (245) (251)
------- -------
Net cash used in investing activities.................... (245) (251)
------- -------
Cash flows from financing activities:
Principal repayment of note payable/capital lease obligation..... (470) (4)
Proceeds from issuance of notes payable.......................... 470 -
Proceeds from repayment of stockholder notes..................... - 2
Net proceeds from issuance of Common Stock....................... - 10
Proceeds from issuance of Preferred Stock........................ 4,095 3,185
------- -------
Net cash provided by financing activities................ 4,095 3,193
------- -------
Effect of exchange rate on cash.................................... - (5)
------- -------
Net increase (decrease) in cash and cash equivalents............... (729) 1,606
Cash and cash equivalents at beginning of year..................... 2,102 1,373
------- -------
Cash and cash equivalents at end of year........................... $ 1,373 $ 2,979
======= =======
Supplemental cash flow disclosures:
Interest paid.................................................... $ 47 $ 135
Supplemental disclosure of noncash financing activities:
Property and equipment acquired under capital leases............. $ - $ 54
Conversion of note payable to Preferred Stock.................... $ 1,650 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 58
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES:
The Company
AccelGraphics, Inc. (the "Company") designs, develops and markets
high-performance, cost-effective, 3-dimensional graphics subsystems, software
accelerators and application utility software products for the professional
Windows NT and Windows 95 market. The Company was incorporated in April 1994 in
the State of California and commenced operations in late 1994.
Reincorporation and reverse stock split
Upon the completion of the offering, the Board of Directors will be
authorized to issue 2,000,000 shares of undesignated preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences, and
number of shares constituting any series or the designation of such series,
without further action or vote by the stockholders.
In January 1997, the Board of Directors approved, subject to stockholder
approval, a one-for-two reverse split of the Company's common and preferred
stock, an increase in the authorized Common Stock to 50,000,000 shares and
reincorporation into the state of Delaware.
All references to share and per share amounts of Common and Preferred stock
and other data in these consolidated financial statements have been
retroactively restated to reflect the reincorporation and reverse stock split.
Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, AccelGraphics Deutschland, which was
incorporated in December 1995. All significant intercompany accounts and
transactions have been eliminated.
Fiscal year end
The Company operates under a 52-53 week fiscal year which ends on the
Friday closest to December 31. Fiscal 1995 and 1996 were 52 week years. For
convenience of presentation, the accompanying consolidated financial statements
have been shown as ending on December 31 of each year.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Translation of foreign currencies
The functional currency of the Company's wholly owned subsidiary is the
local currency. Accordingly, all assets and liabilities are translated into
United States dollars at current exchange rates as of the respective balance
sheet date. Revenue and expense items are translated using the average exchange
rates prevailing during the period. Gains and losses resulting from translation
are accumulated as a component of stockholders' deficit. The Company's sales are
denominated in United States dollars. Net gains and losses resulting from
foreign exchange transactions were not significant during the periods presented.
F-7
<PAGE> 59
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Revenue recognition
Revenues from product sales are generally recognized upon product shipment,
less an allowance for estimated future returns and exchanges. Provision for the
cost of technical support services claims and estimated future warranty for the
company's hardware products are recorded as a cost of revenues upon recognition
of related revenues.
Revenues from software products are recognized in accordance with the
provisions of Statement of Position 91-1, "Software Revenue Recognition."
Revenues from software products have not been significant to date.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market.
Research and development costs
Expenditures for research and development are charged to expense as
incurred. Certain software development costs are capitalized after technological
feasibility has been established. Development costs incurred in the period
between achievement of technological feasibility, which the Company defines as
the establishment of a working model, until the general availability of such
software has been short and software development costs qualifying for
capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs. Non-recurring engineering fees are
reflected as a reduction of research and development expense in the period
earned. During 1996, the Company recognized $190,000 of such fees.
Property and equipment
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets which
range from three to five years. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the remaining lease term.
Concentration of credit risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of bank deposits and trade
accounts receivable. The Company places its cash and cash equivalents in
checking and market rate accounts in high credit quality financial institutions.
The Company's trade accounts receivable are derived from sales to dealers,
original equipment manufacturers and distributors located primarily in the U.S.
and Europe. The Company performs ongoing credit evaluations of its customers and
maintains an allowance for potential credit losses.
Revenues from the Company's former customer, NeTpower, Inc., comprised
16.6% of revenues in 1995. Revenues from Digital Equipment Corporation and
Hewlett-Packard Company were 27.9% and 22.8%, respectively, of revenue in 1996.
Revenues from export sales, primarily Europe, were approximately $850,000
and $5,780,000 during 1995 and 1996, respectively.
F-8
<PAGE> 60
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Three customers accounted for 46.5%, 13.4% and 12.6% of the accounts
receivable balance at December 31, 1996.
Accounting for stock-based compensation
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." In January 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 ("FAS 123"), "Accounting for
Stock-Based Compensation" (see Note 7).
Pro forma balance sheet (unaudited)
If the offering contemplated by this prospectus (the "Offering") is
consummated, all shares of mandatorily redeemable convertible preferred stock
outstanding at the closing date will automatically convert into an aggregate of
approximately 4,509,000 shares of common stock. The pro forma effect of this
transaction has been reflected in the accompanying unaudited pro forma
stockholders' equity as of December 31, 1996.
Pro forma net loss per share (unaudited)
Pro forma net loss per share is computed using the weighted-average number
of common and common equivalent shares outstanding during the periods. Common
equivalent shares consist of mandatorily redeemable convertible preferred stock
(using the if-converted method) and stock options and warrants (using the
treasury stock method). Common equivalent shares are excluded from the
computation if their effect is antidilutive, except that, pursuant to the rules
of the Securities and Exchange Commission, common equivalent shares (using the
treasury stock method and assumed public offering price) issued subsequent to
February 7, 1996 have been included in the computation as if they were
outstanding for all periods presented. Prior period earnings per share data have
not been presented since such amounts are not deemed meaningful. The effect on
net loss per share of the anticipated repayment of the subordinated convertible
related party note payable using proceeds from the public offering is
antidilutive, consequently no supplemental loss per share have been presented.
NOTE 2 -- RELATED-PARTY TRANSACTIONS:
The Company has a subordinated convertible note payable to a related party.
(see Note 5).
The Company has made loans to certain employees totaling $82,000 for the
purchase of common stock. These loans accrue interest at fixed rates ranging
between 5.26% and 7.32% per annum and are due on the earlier of November 9, 1998
or termination of employment with the Company. Upon termination of employment,
the Company has the option to repurchase the unvested shares by canceling the
related portion of the loan.
The Company purchased marketing services from a distributor who is also a
common stockholder for $108,000 and $12,000 in 1995 and 1996, respectively.
These amounts have been recorded in the 1995 and 1996 consolidated statement of
operations as sales and marketing expense. The Company recognized revenue from
this distributor of $109,000 and $1,195,000 in 1995 and 1996, respectively.
The Company's outside legal counsel are Series A and Series B stockholders.
The Company incurred legal expenses to this stockholder of $89,000 and $121,000
during 1995 and 1996, respectively.
F-9
<PAGE> 61
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Raw materials............................................ $ 455 $ 144
Work-in-process.......................................... 493 41
Finished goods........................................... 63 322
------ ----
$1,011 $ 507
====== ====
Property and equipment:
Office furniture and equipment........................... $ 587 $ 871
Leasehold improvements................................... 6 27
------ ----
593 898
Less: accumulated depreciation and amortization.......... (158) (386)
------ ----
$ 435 $ 512
====== ====
</TABLE>
At December 31, 1996 the Company had $54,000 of capitalized
lease equipment and related accumulated amortization of $5,000.
<TABLE>
<S> <C> <C>
Accrued liabilities:
Accrued employee compensation............................ $ 240 $ 616
Warranty reserve, customer support and other............. 186 507
---- ----
$ 426 $1,123
==== ====
</TABLE>
NOTE 4 -- LINE OF CREDIT:
The Company has a revolving line of credit agreement with a bank, which,
through October 1997, provides for maximum borrowings in an amount up to the
lower of 80% of eligible accounts receivable or $3,000,000. Borrowings under the
line are secured by all of the Company's assets and bear interest at the bank's
prime rate plus 0.25% per annum (8.5% at December 31, 1996). The agreement
requires that the Company maintain certain financial ratios and levels of
tangible net worth and profitability and also restricts the Company's ability to
pay cash dividends. At December 31, 1996, there were no borrowings and
$1,109,000 of standby letters of credit to vendors outstanding under the line of
credit.
NOTE 5 -- SUBORDINATED CONVERTIBLE NOTE PAYABLE TO A RELATED PARTY:
In December 1994, the Company issued a subordinated convertible note
payable in the amount of $3,300,000 to Kubota Corporation ("Kubota"). In
connection with the issuance of its Series A Preferred Stock in June 1995,
Kubota converted $1,650,000 of the note into 990,000 shares Series of A
Preferred Stock. The outstanding balance of $1,650,000, together with accrued
interest of $98,000, was replaced with a new subordinated convertible note
payable of $1,748,000 which is due on June 20, 1998. Interest at the prime rate
(8.25% at December 31, 1996) is payable on a quarterly basis. Interest expense
under the note payable was $178,000 and $144,000 during the years ended December
31, 1995 and 1996, respectively. In the event the Company undertakes a dilutive
issuance of stock, the note is convertible into Kubota's pro rata share of the
new stock being issued as such new stock's issuance price.
NOTE 6 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
The Company has authorized 10,000,000 shares of Preferred Stock -- $0.001
par value, of which 3,477,000, 3,477,000, 1,100,000 and 1,100,000 shares have
been designated Series A, Series A-1, Series B and
F-10
<PAGE> 62
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Series B-1 Mandatorily Redeemable Convertible Preferred Stock, respectively
(collectively referred to as "Preferred Stock").
A summary of Preferred Stock activity is as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
SHARES AMOUNT
------- -------
<S> <C> <C>
Balance at December 31, 1994....................................... -- $ --
Issuance of Series A Preferred Stock (June 1995)
at $1.67 per share for cash...................................... 1,707 2,845
Issuance of Series A Preferred Stock (June 1995)
at $1.67 per share upon conversion of note with Kubota
Corporation...................................................... 990 1,650
Issuance of Series A Preferred Stock (July 1995)
at $1.67 per share for cash...................................... 750 1,250
------ ------
Balance at December 31, 1995....................................... 3,447 5,745
Issuance of Series B Preferred Stock (March 1996)
at $3.00 per share for cash...................................... 1,062 3,185
------ ------
Balance at December 31, 1996....................................... 4,509 $ 8,930
====== ======
</TABLE>
At December 31, 1996, no Series A-l or Series B-1 preferred stock has been
issued.
Holders of Preferred Stock have certain rights, preferences and
restrictions with respect to dividends, redemption, conversion, liquidation,
antidilution and voting as set forth in the amended and restated Articles of
Incorporation, which are summarized below:
Dividends
Holders of Series A and Series B Preferred Stock are entitled to receive
noncumulative, preferential annual dividends when declared of $0.167 and $0.30,
respectively, per share. Under the California Corporations Code, the Company is
legally restricted from distributing dividends because of its accumulated
deficit.
Redemption
With consent of the holders of no less than 60% of the respective series of
the then outstanding Preferred Stock, on or after June 20, 2001 (for Series A)
and on or after March 7, 2002 (for Series B), the Company must redeem one-third
of the outstanding shares of the respective series of Preferred Stock that are
requested to be redeemed (by such holders) per year until all such shares of
Preferred Stock are redeemed. The Redemption price for Series A and Series B
will be the original issue price plus declared and unpaid dividends.
Conversion
Each share of Preferred Stock is convertible at the option of the holder
into one share of Common Stock. Such Conversion Price is subject to adjustment
to give effect to certain dilutive events that may occur. Conversion occurs
automatically for each share of Preferred Stock upon closing of an underwritten
public offering with a minimum price per share of $7.00 and aggregate proceeds
to the Company of at least $7,500,000.
Liquidation
In the event of liquidation, acquisition, merger or sale of substantially
all of the assets of the Company, holders of Series A and Series B Preferred
Stock are entitled to a per share distribution in preference to holders of
Common Stock equal to $1.67 and $3.00, respectively, plus any declared but
unpaid dividends. Thereafter, any excess, up to specified levels, will be
distributed pro rata to all stockholders on an if converted basis. In the event
funds are insufficient to make a complete distribution to the holders of
Preferred Stock, as
F-11
<PAGE> 63
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
described above, the remaining assets of the Company will be distributed to the
holders of Preferred Stock in proportion to the aggregate preferential amounts
owed to such holders upon a liquidation, dissolution or winding up of the
Company.
Antidilution
In the event the Company issues any shares of stock for a price per share
that is less than the conversion price for the Preferred Stock, then the
conversion price is adjusted in proportion to the dilutive effect of the new
shares issued.
Voting
The holders of each share of Preferred Stock shall have the right to one
vote for each share of Common Stock into which the Preferred Shares could then
be converted. The holders of Preferred Stock have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock.
NOTE 7 -- COMMON STOCK AND STOCK OPTION PLAN:
Common Stock
Approximately 1,152,000 shares of Common Stock were issued to certain
employees as restricted stock. Such restriction lapses at various times through
March 1998. At December 31, 1996, approximately 372,000 common shares were
subject to repurchase by the Company.
Stock Plan
The 1995 Stock Plan (the "Plan"), authorizes the Board of Directors to
grant incentive stock options, nonstatutory stock options and stock purchase
rights to employees and consultants. Under the Plan, incentive stock options are
granted at a price not less than 100% of the fair market value of the Company's
Common Stock and at a price not less than 110% of the fair market value for
grants to employees who owned more than 10% of the voting power of all classes
of stock on the date of grant, as determined by the Company's Board of
Directors. Nonqualified stock options may be granted at a price not less than
85% of the fair market value of the Common Stock and at a price not less than
110% of the fair market value for grants to a person who owned more than 10% of
voting power of all classes of stock on the date of grant, as determined by the
Board of Directors. Stock purchase rights may be granted at a price not less
than 85% of the fair market value of the Common Stock and at a price of 100% of
the fair market value of the Common Stock for grants to a stockholder owning 10%
or more of the Company's outstanding stock. Stock purchase rights expire 30 days
after the date of grant. Options generally become exercisable at a rate of not
less than 25% per year over a four year vesting period. At December 31, 1996,
options authorized under the Plan were 2,000,000 (see Note 10) and options for
approximately 610,000 shares were available for future grant.
F-12
<PAGE> 64
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Transactions under the 1995 Stock Plan are summarized as follows (in
thousands except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996
------------------- -------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of period............ -- 457 $ 0.17
Granted..................................... 670 $ 0.16 723 $ 1.74
Exercised................................... (202) $ 0.13 (129) $ 0.17
Canceled.................................... (11) $ 0.15 (44) $ 0.15
------ ------
Outstanding at period end..................... 457 $ 0.17 1,007 $ 1.30
====== ======
Options exercisable at period end............. 120 $ 0.17 155 $ 0.22
====== ======
Weighted average grant date fair value of
options granted during the year............. $ 0.16 $ 2.59
====== ======
Weighted average grant date fair value of
options granted during the year at exercise
prices below market prices.................. $ -- $ 1.53
====== ======
</TABLE>
During the year ended December 31, 1996, the Company granted options for
the purchase of approximately 776,000 shares of Common Stock to employees at
exercise prices ranging from $0.30 to $6.90 per share. Based in part on an
independent valuation of the fair value of the Company's common stock as of July
1996 and December 1996, management has calculated deferred compensation of
approximately $608,000 related to options granted during 1996. Such deferred
compensation will be amortized over the vesting period relating to these
options, of which $212,000 has been recorded during the year ended December 31,
1996.
During 1996, the Company issued 53,000 shares to consultants for services
rendered. Such issuances were recorded at fair market value.
The following table summarizes information about employee stock options
outstanding at December 31, 1996 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING ----------------------------
------------------------------------------------------ WEIGHTED
WEIGHTED AVERAGE WEIGHTED AVERAGE
NUMBER REMAINING AVERAGE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE PRICE
- ----------------------------- ------------------ ---------------- -------------- ----------------- --------
<S> <C> <C> <C> <C> <C>
$0.12 - $0.70................ 815 9.10 $ 0.26 155 $ 0.22
$5.30 - $6.90................ 192 9.88 $ 5.72 -- --
----- ---- ----- --- -----
1,007 9.25 $ 1.30 155 $ 0.22
===== ==== ===== === =====
</TABLE>
F-13
<PAGE> 65
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fair Value Disclosures
Had compensation expense for options granted in 1995 and 1996 been
determined based on the fair value at the grant dates, as prescribed in FAS 123,
the Company's net loss and pro forma net loss per share would have been as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
-------- -------
<S> <C> <C>
Net loss:
As reported............................................. $(4,465) $ (932)
Pro forma............................................... (4,468) (948)
Pro forma net loss per share (unaudited):
As reported............................................. $(0.15)
Pro forma............................................... (0.15)
</TABLE>
The fair value of each option grant is estimated as of the date of grant
using the minimum value method with the following assumptions used for grants
during the applicable period: no dividend yield for both periods; risk-free
interest rates of 5.3% to 7.4% for options granted during the year ended
December 31, 1995 and 5.1% to 6.7% for options granted during the year ended
December 31, 1996; and a weighted average expected option term of 3.5 years for
both periods.
Because the determination of the fair value of all options granted after
the Company becomes a public entity will include an expected volatility factor
in addition to the factors described in the preceding paragraph and, because
additional option grants are expected to be made each year, the above pro forma
disclosures are not representative of pro forma effects on results for future
years.
Warrants
In conjunction with its line of credit agreement, the Company granted the
bank warrants to purchase 30,000 shares of its Series A Preferred Stock at an
exercise price of $1.67 per share. The warrants expire on October 10, 2000. The
warrants had a nominal value at date of grant.
In December 1995, in connection with a development agreement with a
strategic partner, the Company granted a strategic partner warrants to purchase
26,250 shares of the Company's common stock at $3.00 per share. The warrants
expire on the earlier of December 29, 1998 or an initial public offering of the
Company's common stock. The warrants had a nominal value at date of grant.
In conjunction with a lease line of credit, in July 1996 the Company
granted the lessor warrants to purchase 7,000 shares of its Series B preferred
stock at an exercise price of $3.00 per share. The warrants expire on the
earlier of July 1, 2006 or an initial public offering of the Company's common
stock. The warrants had a nominal value at date of grant.
NOTE 8 -- LEASES AND COMMITMENTS:
The Company is obligated under a non-cancelable operating lease for office
space and a non-cancelable capital lease for equipment. The leases expire at
various times through 2000. The office lease agreement provides for rent
abatement and scheduled rent increases and also contains an option to extend the
lease for three years. Rent expense is recognized ratably over the lease term.
Rent expense was $129,000 and $156,000 for the years ended December 31, 1995 and
1996, respectively.
F-14
<PAGE> 66
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum lease commitments under these leases at December 31, 1996
are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASE LEASE
--------- -------
<S> <C> <C>
Year ending December 31,
1997.................................................... $ 144 $ 18
1998.................................................... 37 18
1999.................................................... -- 18
2000.................................................... -- 3
---- ----
Total........................................... $ 181 57
====
Less amount representing interest....................... (7)
----
Present value of capital lease obligation............... 50
Less current portion.................................... (16)
----
Long term capital lease obligation................... $ 34
====
</TABLE>
NOTE 9 -- INCOME TAXES:
No provision for federal and state income taxes was recorded in 1995 or
1996 as the Company incurred net operating losses.
Significant components of the Company's deferred tax assets are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
<S> <C> <C>
Net operating loss carryforwards........................... $ 1,365 $ 1,365
Tax credit carryforwards................................... 100 200
Nondeductible reserves and accruals........................ 370 630
------- -------
Total deferred tax assets................................ 1,835 2,195
Deferred tax asset valuation allowance................... (1,835) (2,195)
------- -------
$ -- $ --
======= =======
</TABLE>
The Company has incurred losses since its inception through December 31,
1996. Management believes that based on the currently available evidence,
including the Company's history of annual losses, the lack of carryback capacity
to realize deferred tax assets, the annual limitation on the utilization of net
operating loss carryforwards, the uncertainty of the development of the market
in which the Company competes and the fact that the market in which the Company
competes is intensely competitive and characterized by rapidly changing
technology, it is more likely than not that the Company will not generate
sufficient taxable income to realize the deferred tax asset. Accordingly, a full
valuation allowance has been recorded.
At December 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $3,500,000 and $1,500,000, respectively,
available to offset future taxable income. Such carryforwards expire beginning
in 2010. The Company also has $100,000 each of federal and state research and
development credit carryforwards. Utilization of approximately $2,500,000 of the
Company's net operating loss and research and development credit carryforwards
is subject to an annual limitation due to ownership change limitations
prescribed by the Internal Revenue Code of 1986 and similar state provisions and
may be further limited should another ownership change occur. The annual
limitation may result in the expiration of the net operating loss and credit
carryforwards before their utilization.
F-15
<PAGE> 67
ACCELGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- SUBSEQUENT EVENTS:
In January 1997, the Board of Directors, subject to stockholder approval,
approved an increase in the number of shares reserved for issuance under the
Company's 1995 Stock Option Plan by 1,300,000 to 3,300,000 shares.
The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in January 1997 and will be approved by the
stockholders in March 1997. A total of 400,000 shares of Common Stock has been
reserved for issuance under the Purchase Plan. The Purchase Plan, which is
intended to qualify under Section 423 of the Code, will be implemented by a
series of twelve month offering periods other than the first offering period
commencing on or about February 1, and August 1, of each year. The first
offering period is expected to commence on the effective date of this offering.
The Purchase Plan will be administered by the Board of Directors or by a
committee appointed by the Board of Directors. Employees including officers and
employee directors of the Company, or of any majority owned subsidiary
designated by the Board of Directors, are eligible to participate in the
Purchase Plan if they are employed by the Company or any such subsidiary for at
least 20 hours per week and more than five months per year. The Purchase Plan
permits eligible employees to purchase Common Stock through payroll deductions,
which may not exceed 10% of an employee's compensation at a price equal to the
lower of 85% of the fair market value of the Company's Common Stock at the
beginning or end of the offering period.
The Company's 1997 Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors in January 1997 and will be approved by the
stockholders in March 1997. A total of 200,000 shares of Common Stock has been
reserved for issuance under the Directors' Plan.
F-16
<PAGE> 68
APPENDIX
DESCRIPTION OF GRAPHICS AND ART
INSIDE COVER:
An NT workstation with 3D overlapping graphics showing scientific
visualization, mechanical CAD, entertainment and business graphics. The caption
is "Accelerating Windows NT Graphics for the Professional."
GATEFOLD:
Center of gatefold has four interlocked gears with a different picture on
each gear. The pictures represent the hardware, graphics pipeline, software
utilities and ISV partners. Each corner of the gatefold has a copy of one of the
gears with small amounts of relevant descriptive text.
GRAPHIC IMAGE PAGE 26:
The title is "3D Graphics Pipeline." Diagram of 4 small boxes in a top row
connected by arrows pointing to the right. This row of boxes is separated by a
second row of five boxes also connected by arrows pointing to the right. The
rows of boxes are separated by a double row of dotted lines. The row of boxes
above the line are labeled on the right as "Host CPU," the area between the
dotted lines is labeled "Bus Interface" and the bottom row of boxes is labeled
on the right as "Graphics Accelerator." The top right hand box is connected
through the area identified as the "Bus Interface" to the bottom left hand box
in the second row, with an arrow pointing toward the bottom box. The boxes are
labeled as follows: along the top row from left to right "Application,"
"Application Programming Interface," "Geometry Transforms," "Lighting
Calculations," along the second row of boxes from left to right "Polygon
Processing," "Texture Mapping," "Z-buffer (depth) Calculations," "Pixel
Processing," "Display Update."
INSIDE BACK COVER:
A copy of the four interlocked gears from the gatefold with the logos of
the Companies in AccelGraphics distribution channels around the drawing.
<PAGE> 69
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDERS, ANY OF THE UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 5
Use of Proceeds............................ 15
Dividend Policy............................ 15
Capitalization............................. 16
Dilution................................... 17
Selected Consolidated Financial Data....... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 19
Business................................... 25
Management................................. 37
Certain Transactions....................... 43
Principal and Selling Stockholders......... 44
Description of Capital Stock............... 46
Shares Eligible for Future Sale............ 49
Underwriting............................... 50
Legal Matters.............................. 51
Experts.................................... 51
Additional Information..................... 51
Index to Financial Statements.............. F-1
</TABLE>
------------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
2,600,000 Shares
LOGO
Common Stock
------------------------------
PROSPECTUS
------------------------------
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY
SOUNDVIEW FINANCIAL
GROUP, INC.
, 1997
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Company's Bylaws require the
Company to indemnify its directors and officers to the fullest extent permitted
by Delaware law, including circumstances in which indemnification is otherwise
discretionary under Delaware law. The Company has entered into indemnification
agreements with its directors containing provisions which are in some respects
broader than the specific indemnification provisions contained in the Delaware
law. The indemnification agreements may require the Company, among other things,
to indemnify its directors against certain liabilities that may arise by reason
of their status or service as directors (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance, if available on reasonable
terms. The Company's Certificate of Incorporation provides for indemnification
of its directors and officers to the maximum extent permitted by the Delaware
law, and the Company's Bylaws provide for indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by Delaware
law. In addition, the Company has entered into Indemnification Agreements with
its directors and officers. Reference is also made to the Underwriting Agreement
indemnifying officers and directors of the Company against certain liabilities.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee, the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
-----------
<S> <C>
SEC registration fee.................................... $ 10,873
NASD filing fee......................................... 4,088
Nasdaq National Market listing fee...................... 45,000
Printing and engraving expenses......................... 150,000
Legal fees and expenses................................. 300,000
Accounting fees and expenses............................ 175,000
Blue Sky qualification fees and expenses................ 10,000
Transfer Agent and Registrar fees....................... 12,000
Miscellaneous fees and expenses......................... 43,039
------
Total................................................. $ 750,000
======
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since April 8, 1994 (the date of incorporation of the Company), the Company
has issued and sold the following securities:
1. In November 1994, the Company issued and sold an aggregate of
910,312 shares of Common Stock to four founders at a purchase price of
$0.06666 per share.
2. On December 22, 1994, the Company entered into a Convertible Note
Purchase Agreement with Kubota Corporation, pursuant to which the Company
issued Kubota Corporation a subordinated convertible promissory note
carrying an initial principal amount of $3,300,000.
II-1
<PAGE> 71
3. In June and July 1995, the Company issued and sold, pursuant to a
Series A Preferred Stock Purchase Agreement, an aggregate of 3,446,997
shares of Series A Preferred Stock to twelve investors at a purchase price
of $1.66666 per share. In connection with this financing, Kubota
Corporation converted $1,650,000 of the outstanding principal on the
Convertible Note into 990,000 shares of Series A Preferred Stock.
4. On October 11, 1995, the Company issued to Silicon Valley Bank a
warrant for the purchase of up to 30,000 shares of Series A Preferred Stock
at an exercise price of $1.66666 per share.
5. On December 29, 1995, the Company issued to Intel Corporation a
warrant for the purchase of up to 26,250 shares of Common Stock at an
exercise price of $3.00 per share.
6. In March 1996, the Company issued and sold, pursuant to a Series B
Preferred Stock Purchase Agreement, an aggregate of 1,061,660 shares of
Series B Preferred Stock to 20 investors at a per share price of $3.00.
7. On July 1, 1996, the Company issued to Phoenix Leasing Incorporated
a warrant for the purchase of up to 7,000 shares of Series B Preferred
Stock at an exercise price of $3.00 per share.
8. From February 1995 through December 1996, the Company granted
options under the 1995 Stock Plan to purchase an aggregate of 1,270,078
shares of Common Stock at exercise prices ranging from $0.12 to $6.90 per
share to 62 employees, directors and consultants.
9. From February 1995 through December 1996, the Company sold 175,749
shares of Common Stock at purchase prices ranging from $0.12 to $5.30 per
share to 14 employees, directors and consultants, pursuant to restricted
stock purchase agreements under the 1995 Stock Plan.
10. From February 1995 through December 1996, the Company issued and
sold 166,600 shares of Common Stock pursuant to the exercise of options
granted under the 1995 Stock Plan at exercise prices ranging from $0.12 per
share to $0.30 to 12 officers, employees and consultants.
The issuance of the above securities was deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Act, Regulation D
promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Act as
transactions by an issuer not involving a public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under such Rule 701. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates, options and warrants issued in such transactions. All recipients
had adequate access, through their relationships with the Company, to
information about the Company.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
2.1 Form of Agreement and Plan of Merger between Registrant and AccelGraphics,
Inc. (a California Corporation)
2.2 Asset Acquisition Agreement dated December 9, 1994 between the Company and
Kubota Graphics Corporation
3.1 Amended and Restated Articles of Incorporation of Registrant (California)
3.2* Amendment to Amended and Restated Articles of Incorporation of Registrant
(California)
3.3 Certificate of Incorporation of Registrant (Delaware)
3.4* Amended and Restated Certificate of Incorporation of Registrant (Delaware)
3.5* Amended and Restated Certificate of Incorporation of Registrant (Delaware)
3.6 Bylaws of Registrant (California)
</TABLE>
II-2
<PAGE> 72
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<S> <C>
3.7 Bylaws of Registrant (Delaware)
4.1* Specimen Common Stock Certificate
4.2 Warrant to Purchase shares of Common Stock
4.3 Warrant to Purchase shares of Series A Preferred Stock
4.4 Warrant to Purchase shares of Series B Preferred Stock
4.5 Convertible Note Purchase Agreement dated December 22, 1994 between the
Company and Kubota Corporation
5.1 Opinion of Venture Law Group, A Professional Corporation
9.1 Amended and Restated Voting Agreement dated March 7, 1996 between the
Company and certain holders of the Company's securities
10.1 1995 Stock Plan, as amended and forms of stock purchase and stock option
agreement
10.2 1997 Directors' Stock Option Plan and form of stock option agreement
10.3 1997 Employee Stock Purchase Plan and form of subscription agreement
10.4 AccelGraphics, Inc. 401(k) Savings & Retirement Plan
10.5 Form of Indemnification Agreement (California)
10.6 Form of Indemnification Agreement (Delaware)
10.7 Amended and Restated Registration Rights Agreement dated as of July 1,
1996, between Registrant and holders of its Preferred Stock and warrant
holders
10.8 Lease Agreement dated December 16, 1994 between the Company and John
Arrillaga, Trustee and Richard T. Perry, Trustee
10.9+ Digital Equipment Corporation OEM Agreement dated February 21, 1996
between the Company and Digital Equipment Corporation
10.10+ Product Purchase Agreement dated as of July 1, 1996 between the Company
and Hewlett-Packard France
10.11+ Turnkey Agreement dated as of February 5, 1996 between the Company and MAT
Technologies Ltd.
10.12+ Software License Agreements dated August 8, 1995, January 23, 1996 and
July 5, 1996, respectively between the Company and 3D Labs Inc.
10.13+ Open GL License Agreement dated June 30, 1992, as amended, between the
Company and Kubota Pacific Computer
10.14 Silicon Valley Bank Loan Business Loan Agreement dated October 11, 1995,
between the Company and Silicon Valley Bank
11.1 Statement of Computation of Pro Forma Net Loss Per Share
21.1 Subsidiaries of Registrant
23.1 Consent of Price Waterhouse LLP, Independent Accountants (included in
II-6)
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (included in II-5)
27 Financial Data Schedule
</TABLE>
- ---------------
*To be filed by amendment.
+Confidential treatment requested.
II-3
<PAGE> 73
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the provisions referenced
in Item 24 of this Registration Statement, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer, or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant will:
(1) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1), or (4) or 497(h) under
the Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-4
<PAGE> 74
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this registration
statement to be signed on its behalf by the undersigned, in the City of San
Jose, State of California, on this 7th day of February 1997.
ACCELGRAPHICS, INC.
By: /s/ JEFFREY W. DUNN
Jeffrey W. Dunn
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Jeffrey W. Dunn and Nancy E. Bush,
and each of them acting individually, as his or her attorney-in-fact, each with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments to this Registration Statement (including post-effective
amendments), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said Registration Statement, or any
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under Securities Act 1993, as amended. In accordance with the
requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------- -------------------
<S> <C> <C>
/s/ JEFFREY W. President, Chief February 7, 1997
DUNN Executive Officer and
(Jeffrey W. Dunn) Director (Principal
Executive Officer)
/s/ NANCY E. Vice President, Finance February 7, 1997
BUSH and Administration; Chief
(Nancy E. Bush) Financial Officer and
Assistant Secretary
(Principal Financial and
Accounting Officer)
GOLD/s/ DAVID E. Director February 7, 1997
(David E. Gold)
/s/ JOS Director February 7, 1997
HENKENS
(Jos Henkens)
/s/ SHINTARO Director February 7, 1997
MIYAMOTO
(Shintaro Miyamoto)
/s/ DAVID Director February 7, 1997
PIDWELL
(David Pidwell)
/s/ PETER Director February 7, 1997
WOLKEN
(Peter Wolken)
</TABLE>
II-5
<PAGE> 75
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated January 30, 1997,
relating to the consolidated financial statements of AccelGraphics, Inc., which
appears in such Prospectus. We also consent to the reference to us under the
headings "Selected Consolidated Financial Data" and "Experts" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated Financial Data."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
February 6, 1997
II-6
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<S> <C> <C>
1.1* Form of Underwriting Agreement............................................
2.1 Form of Agreement and Plan of Merger between Registrant and AccelGraphics,
Inc. (a California Corporation).........................................
2.2 Asset Acquisition Agreement dated December 9, 1994 between the Company and
Kubota Graphics Corporation.............................................
3.1 Amended and Restated Articles of Incorporation of Registrant
(California)............................................................
3.2* Amendment to Amended and Restated Articles of Incorporation of Registrant
(California)............................................................
3.3 Certificate of Incorporation of Registrant (Delaware).....................
3.4* Amended and Restated Certificate of Incorporation of Registrant
(Delaware)..............................................................
3.5* Amended and Restated Certificate of Incorporation of Registrant
(Delaware)..............................................................
3.6 Bylaws of Registrant (California).........................................
3.7 Bylaws of Registrant (Delaware)...........................................
4.1* Specimen Common Stock Certificate.........................................
4.2 Warrant to Purchase shares of Common Stock................................
4.3 Warrant to Purchase shares of Series A Preferred Stock....................
4.4 Warrant to Purchase shares of Series B Preferred Stock....................
4.5 Convertible Note Purchase Agreement dated December 22, 1994 between the
Company and Kubota Corporation..........................................
5.1 Opinion of Venture Law Group, A Professional Corporation..................
9.1 Amended and Restated Voting Agreement dated March 7, 1996 between the
Company and certain holders of the Company's securities.................
10.1 1995 Stock Plan, as amended and forms of stock purchase and stock option
agreement...............................................................
10.2 1997 Directors' Stock Option Plan and form of stock option agreement......
10.3 1997 Employee Stock Purchase Plan and form of subscription agreement......
10.4 AccelGraphics, Inc. 401(k) Savings & Retirement Plan......................
10.5 Form of Indemnification Agreement (California)............................
10.6 Form of Indemnification Agreement (Delaware)..............................
10.7 Amended and Restated Registration Rights Agreement dated as of July 1,
1996, between Registrant and holders of its Preferred Stock and warrant
holders.................................................................
10.8 Lease Agreement dated December 16, 1994 between the Company and John
Arrillaga, Trustee and Richard T. Perry, Trustee........................
10.9+ Digital Equipment Corporation OEM Agreement dated February 21, 1996
between the Company and Digital Equipment Corporation...................
10.10+ Product Purchase Agreement dated as of July 1, 1996 between the Company
and Hewlett-Packard France..............................................
10.11+ Turnkey Agreement dated as of February 5, 1996 between the Company and MAT
Technologies Ltd. ......................................................
10.12+ Software License Agreements dated August 8, 1995, January 23, 1996 and
July 5, 1996, respectively between the Company and 3D Labs Inc. ........
10.13+ Open GL License Agreement dated June 30, 1992, as amended, between the
Company and Kubota Pacific Computer.....................................
10.14 Silicon Valley Bank Loan Business Loan Agreement dated October 11, 1995,
between the Company and Silicon Valley Bank.............................
11.1 Statement of Computation of Pro Forma Net Loss Per Share..................
21.1 Subsidiaries of Registrant................................................
23.1 Consent of Price Waterhouse LLP, Independent Accountants (included in
II-6)...................................................................
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<S> <C> <C>
23.2 Consent of Counsel (included in Exhibit 5.1)..............................
24.1 Power of Attorney (included in II-5)......................................
27 Financial Data Schedule...................................................
</TABLE>
- ---------------
*To be filed by amendment.
+Confidential treatment requested.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of February ____, 1997 (the
"AGREEMENT") is between AccelGraphics, Inc., a California corporation
("ACCELGRAPHICS CALIFORNIA"), and AccelGraphics, Inc., a Delaware corporation
and a wholly-owned subsidiary of AccelGraphics California ("ACCELGRAPHICS
DELAWARE"). AccelGraphics Delaware and AccelGraphics California are sometimes
referred to herein as the "CONSTITUENT CORPORATIONS."
RECITALS
A. AccelGraphics Delaware is a corporation duly organized and existing
under the laws of the State of Delaware and has an authorized capital of
45,000,000 shares, 25,000,000 shares of which are designated "Common Stock," par
value $.001 per share, and 20,000,000 shares of which are designated "Preferred
Stock," par value $.001 per share. Of such authorized shares of Preferred
Stock, 6,954,000 shares are designated "Series A Preferred Stock," 6,954,000
shares are designated "Series A-1 Preferred Stock," 2,200,000 are designated
"Series B Preferred Stock," and 2,200,000 shares are designated "Series B-1
Preferred Stock." As of the date hereof, 1,000 shares of AccelGraphics Delaware
Common Stock were issued and outstanding, all of which are held by AccelGraphics
California, and no shares of AccelGraphics Delaware Preferred Stock were issued
and outstanding.
B. AccelGraphics California is a corporation duly organized and
existing under the laws of the State of California and has an authorized capital
of 45,000,000, none of which has any par value. Of such authorized capital,
25,000,000 shares are designated "Common Stock" and 20,000,000 shares are
designated "Preferred Stock." Of such authorized shares of Preferred Stock,
6,954,000 shares are designated "Series A Preferred Stock," 6,954,000 shares are
designated "Series A-1 Preferred Stock," 2,200,000 shares are designated "Series
B Preferred Stock," and 2,200,000 shares are designated "Series B-1 Preferred
Stock." As of the date hereof, 2,505,320 shares of Common Stock, 6,893,998
shares of Series A Preferred Stock, and 2,123,334 shares of Series B Preferred
Stock were issued and outstanding.
C. The Board of Directors of AccelGraphics California has determined
that, for the purpose of effecting the reincorporating of AccelGraphics
California in the State of Delaware, it is advisable and in the best interests
of AccelGraphics California and its shareholders that AccelGraphics California
merge with and into AccelGraphics Delaware upon the terms and conditions herein
provided.
D. The respective Boards of Directors of AccelGraphics Delaware and
AccelGraphics California, the shareholders of AccelGraphics California and the
sole shareholder of AccelGraphics Delaware have approved this Agreement and have
directed that this Agreement be executed by the undersigned officers.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, AccelGraphics Delaware and AccelGraphics California hereby
agree, subject to the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
AccelGraphics California shall be merged with and into AccelGraphics Delaware
(the "MERGER"), the separate existence of AccelGraphics California shall cease
and AccelGraphics Delaware shall be, and is herein sometimes referred to as, the
"SURVIVING CORPORATION," and the name of the Surviving Corporation shall be
"AccelGraphics, Inc."
1.2 Filing and Effectiveness. The Merger shall become effective when
the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and
approved by the shareholders of each Constituent Corporation in accordance with
the requirements of the Delaware General Corporation Law and the California
General Corporation Law;
(b) All of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied or duly waived by
the party entitled to satisfaction thereof;
(c) An executed Agreement of Merger or an executed counterpart of
this Agreement and related required certificates meeting the requirements of the
Delaware General Corporation Law shall have been filed with the Secretary of
State of the State of Delaware; and
(d) An executed Agreement of Merger or an executed counterpart of
this Agreement and related required certificates meeting the requirements of the
California General Corporation Law shall have been filed with the Secretary of
State of the State of California.
The date and time when the Merger shall become effective, as aforesaid,
is herein called the "EFFECTIVE DATE OF THE MERGER."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of AccelGraphics California shall cease and AccelGraphics
Delaware, as the Surviving Corporation, (a) shall continue to possess all of its
assets, rights, powers and property as constituted immediately prior to the
Effective Date of the Merger, (b) shall be subject to all actions previously
taken by its and AccelGraphics California's Boards of Directors, (c) shall
succeed, without other transfer, to all of the assets, rights, powers and
property of AccelGraphics California in the manner as more fully set forth in
Section 259 of the Delaware General Corporation Law, (d) shall continue to be
subject to all of its debts, liabilities and obligations as constituted
immediately prior to the Effective Date of
<PAGE> 3
the Merger, and (e) shall succeed, without other transfer, to all of the debts,
liabilities and obligations of AccelGraphics California in the same manner as if
AccelGraphics Delaware had itself incurred them, all as more fully provided
under the applicable provisions of the Delaware General Corporation Law and the
California General Corporation Law.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
AccelGraphics Delaware shall be the Certificate of Incorporation of the
Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.2 Bylaws. The Bylaws of AccelGraphics Delaware as in effect
immediately prior to the Effective Date of the Merger shall continue in full
force and effect as the Bylaws of the Surviving Corporation until duly amended
in accordance with the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of
AccelGraphics Delaware immediately prior to the Effective Date of the Merger
shall be the directors and officers of the Surviving Corporation until their
successors shall have been duly elected and qualified or until as otherwise
provided by law, the Certificate of Incorporation of the Surviving Corporation
or the Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 AccelGraphics California Common Stock. Upon the Effective Date of
the Merger, each one share of AccelGraphics California Common Stock issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by the Constituent Corporations, the holder of such share or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $0.001 par value, of AccelGraphics
Delaware.
3.2 AccelGraphics California Preferred Stock. Upon the Effective Date
of the Merger, each one share of AccelGraphics California Series A Preferred
Stock, Series A-1 Preferred Stock, Series B Preferred Stock, and Series B-1
Preferred Stock issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by the Constituent Corporations, the
holder of such shares or any other person, be converted into and exchanged for
one fully paid and nonassessable share of Series A Preferred Stock, Series A-1
Preferred Stock, Series B Preferred Stock, and Series B-1 Preferred Stock of
AccelGraphics Delaware, $0.001 par value, respectively, having such rights,
preferences and privileges as set forth in the Certificate of Incorporation of
AccelGraphics Delaware, which shares of Preferred Stock shall be convertible
into shares of AccelGraphics Delaware's Common Stock, $.001 par value, according
to the terms of the Certificate of Incorporation of AccelGraphics Delaware.
3.3 AccelGraphics California Options, Stock Purchase Rights,
Convertible Securities and Warrants. Upon the Effective Date of the Merger,
AccelGraphics
<PAGE> 4
Delaware shall assume the obligations of AccelGraphics California under
AccelGraphics California's 1995 Stock Option Plan and all other employee benefit
plans of AccelGraphics California, including outstanding stock options of
AccelGraphics California. Each outstanding and unexercised option, other right
to purchase or security convertible into AccelGraphics California Common Stock
or Preferred Stock or warrant to purchase AccelGraphics California Common Stock
or Preferred Stock shall become an option, right to purchase, security
convertible into or warrant to purchase AccelGraphics Delaware's Common Stock or
Preferred Stock, respectively, on the basis of one share of AccelGraphics
Delaware's Common Stock or Preferred Stock, for each one share of AccelGraphics
California Common Stock or Preferred Stock, respectively, issuable pursuant to
any such option, stock purchase right, convertible security or warrant, on the
same terms and conditions and at an aggregate exercise price equal to the
exercise price applicable to any such AccelGraphics California option, stock
purchase right, other convertible security or warrant at the Effective Date of
the Merger.
A number of shares of AccelGraphics Delaware's Common Stock and
Preferred Stock shall be reserved for issuance upon the exercise of options,
stock purchase rights, convertible securities and warrants (including Preferred
Stock) on the basis of one share of AccelGraphics Delaware Common Stock and
Preferred Stock for one share of AccelGraphics California Common Stock and
Preferred Stock so reserved immediately prior to the Effective Date of the
Merger.
3.4 AccelGraphics Delaware Common Stock. Upon the Effective Date of
the Merger, each share of Common Stock, $0.001 par value, of AccelGraphics
Delaware issued and outstanding immediately prior thereto shall, by virtue of
the Merger and without any action by AccelGraphics Delaware, the holder of such
shares or any other person, be canceled and returned to the status of authorized
but unissued shares.
3.5 Exchange of Certificates. After the Effective Date of the Merger,
each holder of an outstanding certificate representing shares of AccelGraphics
California Common Stock or Preferred Stock may, at such shareholder's option,
surrender the same for cancellation to the transfer agent and registrar for the
Common Stock of AccelGraphics Delaware, as exchange agent (the "EXCHANGE
AGENT"), and each such holder shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of shares of the
appropriate class and series of AccelGraphics Delaware's capital stock into
which the surrendered shares were converted as herein provided. Until so
surrendered, each outstanding certificate theretofore representing shares of
AccelGraphics California capital stock shall be deemed for all purposes to
represent the number of whole shares of the appropriate class and series of
AccelGraphics Delaware's capital stock into which such shares of AccelGraphics
California capital stock were converted in the Merger.
The registered owner on the books and records of AccelGraphics Delaware
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to AccelGraphics Delaware or the Exchange Agent, have and be
entitled to exercise any voting and other
<PAGE> 5
rights with respect to and to receive dividends and other distributions upon the
shares of capital stock of AccelGraphics Delaware represented by such
outstanding certificate as provided above.
Each certificate representing capital stock of AccelGraphics Delaware
so issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of AccelGraphics California
so converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of AccelGraphics Delaware in compliance with applicable laws.
If any certificate for shares of AccelGraphics Delaware stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Exchange Agent any transfer or other
taxes payable by reason of the issuance of such new certificate in a name other
than that of the registered holder of the certificate surrendered or establish
to the satisfaction of AccelGraphics Delaware that such tax has been paid or is
not payable.
IV. GENERAL
4.1 Covenants of AccelGraphics Delaware. AccelGraphics Delaware
covenants and agrees that it will, on or before the Effective Date of the
Merger:
(a) File any and all documents with the California Franchise Tax
Board necessary for the assumption by AccelGraphics Delaware of all of the
franchise tax liabilities of AccelGraphics California; and
(b) Take such other actions as may be required by the California
General Corporation Law.
4.2 Further Assurances. From time to time, as and when required by
AccelGraphics Delaware or by its successors or assigns, there shall be executed
and delivered on behalf of AccelGraphics California such deeds and other
instruments, and there shall be taken or caused to be taken by AccelGraphics
Delaware and AccelGraphics California such further and other actions as shall be
appropriate or necessary in order to vest or perfect in or conform of record or
otherwise by AccelGraphics Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of AccelGraphics California and otherwise to carry out the
purposes of this Agreement, and the officers and directors of AccelGraphics
Delaware are fully authorized in the name and on behalf of AccelGraphics
California or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger,
this Agreement may be terminated and the Merger may be abandoned for any reason
<PAGE> 6
whatsoever by the Board of Directors of either AccelGraphics California or
AccelGraphics Delaware, or both, notwithstanding the approval of this Agreement
by the shareholders of AccelGraphics California or by the sole shareholder of
AccelGraphics Delaware, or by both.
4.4 Amendment. The Boards of Directors of the Constituent Corporations
may amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretaries of State of the States of
California and Delaware, provided that an amendment made subsequent to the
adoption of this Agreement by the shareholders of either Constituent Corporation
shall not: (a) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation, (b) alter or change any term of the Certificate of Incorporation of
the Surviving Corporation to be effected by the Merger, or (c) alter or change
any of the terms and conditions of this Agreement if such alteration or change
would adversely affect the holders of any class of shares or series of capital
stock of such Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving
Corporation in the State of Delaware is located at Corporation Service Co., 1013
Centre Road, in the City of Wilmington, Delaware 19805, County of New Castle,
and Corporation Service Company is the registered agent of the Surviving
Corporation at such address.
4.6 FIRPTA Notification.
(a) On or before the Effective Date of the Merger, AccelGraphics
California shall deliver to AccelGraphics Delaware, as agent for the
shareholders of AccelGraphics California, a properly executed statement in such
form as reasonably requested by counsel for AccelGraphics California and
conforming to the requirements of Treasury Regulation Section 1.897-2(h)(1)(i)
(the "STATEMENT"). AccelGraphics Delaware shall, upon request, provide a copy
thereof to any person that was a shareholder of AccelGraphics California
immediately prior to the Merger. In consequence of the approval of the Merger by
the shareholders of AccelGraphics California, as provided in Recital D hereof,
(i) such shareholders shall be considered to have requested that the Statement
be delivered to AccelGraphics Delaware as their agent and (ii) AccelGraphics
Delaware shall be considered to have received a copy of the Statement at the
request of the AccelGraphics California shareholders for purposes of satisfying
AccelGraphics Delaware's obligations under Treasury Regulation Section
1.1445-2(c)(3).
(b) AccelGraphics California shall deliver to the Internal
Revenue Service a notice regarding the Statement in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2).
4.7 Expenses. Each party to the transactions contemplated by this
Agreement (including, without limitation, AccelGraphics California,
AccelGraphics Delaware and
<PAGE> 7
their respective shareholders) shall pay its own expenses, if any, incurred in
connection with such transactions.
4.8 Tax Opinion a Condition Precedent. The Merger shall not be
consummated unless, on or prior to the Effective Date of the Merger,
AccelGraphics California receives from Venture Law Group, A Professional
Corporation ("VLG"), a written opinion that the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended. Such opinion shall be contingent on receipt by VLG of
(a) certain representations from AccelGraphics California and AccelGraphics
Delaware requested by VLG and (b) delivery by AccelGraphics California's
shareholders as shall be designated by VLG of "Shareholder Continuity of
Interest Certificates" in such form as requested by VLG.
4.9 Agreement. Executed copies of this Agreement will be on file at
the principal place of business of the Surviving Corporation at 1942 Zanker
Road, San Jose, California 95112, and copies thereof will be furnished to any
shareholder of either Constituent Corporation, upon request and without cost.
4.10 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.11 Counterparts. In order to facilitate the filing and recording of
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
<PAGE> 8
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of AccelGraphics Delaware and
AccelGraphics California, is hereby executed on behalf of each of such two
corporations and attested by their respective officers thereunto duly
authorized.
ACCELGRAPHICS, INC., a
Delaware corporation
By:__________________________
Name:________________________
Title:_________________________
ATTEST:
________________________________
Michael W. Hall, Secretary
ACCELGRAPHICS, INC., a
California corporation
By:__________________________
Name:________________________
Title:_________________________
ATTEST:
________________________________
Edmund S. Ruffin, Jr., Secretary
<PAGE> 9
ACCELGRAPHICS, INC.
(Disappearing Corporation)
OFFICERS' CERTIFICATE
Jeffrey W. Dunn and Michael W. Hall certify that:
1. They are the President and Chief Executive Officer and the
Secretary, respectively, of AccelGraphics, Inc., a corporation organized under
the laws of the State of California.
2. The corporation has authorized two classes of stock, designated
"Common Stock" and "Preferred Stock." The authorized series of Preferred Stock
have been designated "Series A Preferred," "Series A-1 Preferred," "Series B
Preferred," and "Series B-1 Preferred."
3. There were 2,505,320 shares of Common Stock, 6,893,998 shares of
Series A Preferred Stock, and 2,123,334 shares of Series B Preferred Stock
outstanding as of the record date (the "Record Date") of the shareholders'
meeting at which the Agreement and Plan of Merger attached hereto (the "Merger
Agreement") was approved.
4. The principal terms of the Merger Agreement were approved by the
Board of Directors and by the vote of a number of shares of each class and
series of stock which equaled or exceeded the vote required.
5. The number of shares voting in favor of the amendment equaled or
exceeded the vote required, such required vote being (i) a majority of the
outstanding shares of Common Stock and (ii) a majority of the outstanding shares
of Series A and Series B Preferred Stock voting together as a separate class.
Jeffrey W. Dunn and Michael W. Hall further declare under penalty of
perjury under the laws of the State of California that each has read the
foregoing certificate and knows the contents thereof and that the same is true
of their own knowledge.
Executed in San Jose, California on February , 1997.
___________________________________
Jeffrey W. Dunn, President and
Chief Executive Officer
___________________________________
Michael W. Hall, Secretary
<PAGE> 10
ACCELGRAPHICS, INC.
(Surviving Corporation)
OFFICERS' CERTIFICATE
Jeffrey W. Dunn and Michael W. Hall certify that:
1. They are the President and Chief Executive Officer and the
Secretary, respectively, of AccelGraphics, Inc., a corporation organized under
the laws of the State of Delaware.
2. The corporation has authorized two classes of stock, designated
"Common Stock" and "Preferred Stock."
3. There are 1,000 shares of Common Stock outstanding and entitled to
vote on the Agreement and Plan of Merger attached hereto (the "Merger
Agreement"). There are no shares of Preferred Stock outstanding.
4. The principal terms of the Merger Agreement were approved by the
Board of Directors and by the vote of a number of shares of each class and
series of stock which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes
entitled to be cast by holders of outstanding shares of Common Stock.
Jeffrey W. Dunn and Michael W. Hall further declare under penalty of
perjury under the laws of the State of Delaware that each has read the foregoing
certificate and knows the contents thereof and that the same is true of their
own knowledge.
Executed in San Jose, California on February ___, 1997.
___________________________________
Jeffrey W. Dunn, President and
Chief Executive Officer
___________________________________
Michael W. Hall, Secretary
<PAGE> 1
EXHIBIT 2.2
ASSET ACQUISITION AGREEMENT
THIS ASSET ACQUISITION AGREEMENT (this "Agreement") is entered into as
of December 9th, 1994 by and between ACCELGRAPHICS, INC. ("Purchaser"), a
California corporation with its principal address at 2630 Walsh Avenue, Santa
Clara, California 95051-0905, and KUBOTA GRAPHICS CORPORATION ("Seller"), a
California corporation with its principal address at 2630 Walsh Avenue, Santa
Clara, California 95051-0905.
RECITALS
A. Seller is engaged in the business of developing, manufacturing,
marketing and selling graphics computer systems (the "Seller Business"); and
B. The parties desire that Seller sell, assign, transfer and convey to
Purchaser, and that Purchaser purchase from Seller, certain specific assets of
Seller relating to the Seller Business and further that Seller delegate certain
liabilities to Purchaser, and that Purchaser assume such specific liabilities
relating to the Seller Business, all upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth or referenced below:
1.1 "Assumed Liabilities" shall have the meaning set forth in
Section 2.2 hereof.
1.2 "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
1.3 "Closing Date" shall mean December 28, 1994 or such other
date as the parties shall mutually agree to in writing.
1.4 "Contracts" shall mean the purchase orders, contracts,
agreements (including all known and unknown evaluation agreements) and
arrangements as listed on Exhibit A hereto, including all rebates, refunds,
deposits or credits with respect thereto and all claims, demands, causes of
action and other rights of Seller thereunder.
1.5 "DEC" shall mean Digital Equipment Corporation.
1.6 "Incidental Expenses" shall mean all Seller expenses
incurred from November 4, 1994 until the Closing and subsequent to the Closing
Date, which are attributable to Purchaser's business operations and include
Seller's payment of Purchaser's employees' salaries, MIS expenses and other
expenses arising out of Purchaser's normal
<PAGE> 2
course of business which is part of the intercompany accounts receivables and as
more fully described in Exhibit H.
1.7 "Inventory" shall mean the inventory related to the Seller
Business listed on Exhibit B hereto, as such Exhibit shall be amended as of the
Closing Date to reflect changes therein occurring in the ordinary course of the
Seller Business prior to the Closing.
1.8 "License Agreements" shall mean the Comprehensive
Settlement Agreement among Seller, Cabot Computer, Inc., Cabot Corporation and
DEC in the form attached hereto as Exhibit C-1 (in this Exhibit C-1, any
references to ActionGraphics shall mean Purchaser), which will take effect upon
execution by Kubota Corporation, the Assignment and Assumption Agreement
(Service Agreement) dated as of September 29, 1994 between Seller and Picker in
the form attached hereto as Exhibit C-2, and the Comprehensive Manufacturing and
Source Code License Agreement dated as of October 6, 1994 between Seller and
Picker in the form attached hereto as Exhibit C-3.
1.9 "Picker" shall mean Picker International, Inc.
1.10 "Purchase Price" shall have the meaning set forth in
Section 2.3 hereof.
1.11 "Purchased Assets" shall mean the Contracts, the
Inventory, the Transferred Technology and the Tangible Assets.
1.12 "Sierra 48ZI" shall mean Seller's PCI-based graphics
product with additional frame buffer memory (48 planes total) and imaging
support (contrast enhancement and bilinear interpolation), together with
associated imaging libraries, as more fully described in Exhibit D hereto.
1.13 "Tangible Assets" shall mean all of the equipment,
furniture and other tangible assets and properties listed on Exhibit E hereto,
as such Exhibit shall be amended to reflect changes therein occurring in the
ordinary course of the Seller Business prior to the Closing.
1.14 "Trade Payables" shall mean the accounts payable related
to Inventory, Tangible Assets and consulting services listed on Exhibit F
hereto, as such Exhibit shall be amended to reflect changes therein occurring in
the ordinary course of the Seller Business prior to the Closing.
1.15 "Transferred Technology" shall mean all of Seller's
interests in intellectual property rights relating to the Sierra 48ZI and the
technology listed in Exhibits G-I and G-2 hereto, including, without limitation,
any patents, trademarks, service marks, copyrights end applications therefor and
registrations thereof, mask works and mask work registrations, trade names and
trade styles, trade secrets, know-how, processes, formulae, business and
marketing plans, and confidential and other proprietary
-2-
<PAGE> 3
information owned by Seller or that may be assigned by Seller to Purchaser under
the terms of this Agreement.
2. Purchase and Sale of Purchased Assets; Assumption of Liabilities.
2.1 Purchase and Sale. Subject to and upon the terms and
conditions of this Agreement, effective as of the Closing, Seller agrees to
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser agrees to
purchase from Seller, all of Seller's right, title and interest in and to the
Purchased Assets, subject to Section 2.5; provided, however, that all rights
acquired by Purchaser in and to the Transferred Technology shall be subject to
the rights granted to DEC and Picker pursuant to the License Agreements, and
Purchaser specifically acknowledges and affirms that (i) Kubota Corporation is
authorized to release the escrowed material to DEC if DEC cannot procure the
48ZI from Purchaser, as defined under the Comprehensive Settlement Agreement as
set forth in Exhibit C-1 and (ii) in the event the escrowed materials are
released to DEC, Kubota Corporation is authorized, on Purchaser's behalf, to
grant DEC the non-exclusive manufacturing rights to the 48ZI product, all as set
forth in Exhibit C-1.
Seller's sale of the Transferred Technology to Buyer shall not
affect Kubota Corporation's or Kubota Computer, Inc.'s licenses of OpenGL as set
forth in Addendum Number One to the OpenGL License agreement
Physical delivery of the Purchased Assets shall be made at the
Sellers place of business. Risk of loss, damage or destruction to the Purchased
Assets after the Closing shall be borne by Purchaser, except to the extent such
loss, damage or destruction shall have been caused by Seller's negligence or
willful misconduct.
2.2 Assumption of Liabilities.
(a) Subject to the terms and conditions of this
Agreement, effective as of the Closing, Seller shall delegate to Purchaser and
Purchaser shall assume from Seller and pay, perform and discharge according to
their terms all of the following liabilities and obligations of Seller (the
"Assumed Liabilities"):
(i) The Trade Payables;
(ii) contractual liabilities or obligations
arising from and after the Closing Date under the Contracts, subject to Section
2.5, and
(iii) any federal, state or local taxes,
including, but not limited to, sales taxes, use taxes, conveyance taxes,
transfer taxes, filing fees, recording fees, reporting fees and other similar
duties, taxes and fees, if any, imposed upon, or resulting from, the transfer of
the Purchased Assets hereunder. Purchaser shall remit such federal, state or
local taxes to Seller, who in turn shall remit such taxes to the proper taxing
authorities.
-3-
<PAGE> 4
(b) Purchaser does not assume, and Seller does not transfer,
assign or delegate, any liabilities or obligations, whether or not related to
the Seller Business, and whether currently fixed and determined, contingent or
otherwise, other than the Assumed Liabilities to be expressly assumed by
Purchaser pursuant to Section 2.2(a) hereof. All such liabilities and
obligations not expressly assumed by Purchaser ("Excluded Liabilities") shall
remain liabilities of Seller, which shall be solely liable to perform and
discharge such liabilities and obligations. Excluded Liabilities shall include,
without limitation, the following:
(i) Any income or similar taxes based upon or
measured by revenue, income, profit or gain from the transfer of the Purchased
Assets or the operation of the Seller Business prior to the Closing;
(ii) any outstanding obligations of Seller for
borrowed money due to banks or other lenders;
(iii) any obligation of Seller for legal, accounting
or other professional fees, or any other costs or expenses of Seller which am
related to the consummation of the transactions contemplated herein.
2.3 Purchase Price. In consideration for Purchaser's purchase
of the Purchased Assets and payment of the Incidental Expenses. Purchaser shall
pay to Seller the sum of $779,668 (the "Purchase Price"), payable at the Closing
by check or by wire transfer to an account designated in writing by Seller.
2.4 License of Sierra 48ZI Imagine Libraries and "Zero Time
Clear" Feature. Purchaser hereby grants to Seller and Seller's parent, Kubota
Corporation and any designated Kubota Corporation subsidiary or affiliate,
(collectively, "Seller's Successor(s) in Interest"), a worldwide, nonexclusive,
(subject to Section 3), royalty-free license to modify or have modified the
Sierra 48ZI imaging libraries and the "Zero Time Clear" feature identified in
Exhibit G-1, to the limited extent necessary (i) to satisfy Seller's obligations
under the License Agreements to modify any portion of the Sierra 48ZI imaging
libraries or the "Zero Time Clear" feature that may infringe intellectual
property rights of any third party, or (ii) to correct software bugs or make
enhancements to the 4821 imaging libraries or "Zero Time Clear" feature and
provide other services as part of the support and/or value-added software
services Seller's Successor(s) in Interest offers to its existing customers.
2.5 Assignments Requiring Third-Party Consents. If the
assignment of any Contract hereunder shall require the consent of any third
party, such assignment shall be subject to and effective as of the granting of
such consent. Purchaser shall be solely responsible for obtaining such
third-party consents, provided that Seller shall assist Purchaser as is
reasonably necessary, at Purchaser's expense, in obtaining such third-party
consents.
-4-
<PAGE> 5
2.6 Allocation. The Purchase Price shall be allocated for all
federal, state and local tax purposes among the Purchased Assets in the manner
set forth on Exhibit I hereto. Neither Purchaser nor Seller shall take any
position for purposes of any federal, state or local income tax respecting the
allocation of the Purchase Price which is inconsistent with such allocation.
2.7 Reduction in Purchase Price. On or before the Closing,
Purchaser shall take an inventory of the Tangible Assets and the Inventory. In
the event, for whatever reason, any of the tangible assets or the Inventory is
no longer available for delivery to Purchaser at the Closing, the Purchase Price
shall be reduced by the dollar amount set forth opposite such missing item as
set forth in Exhibit B or Exhibit E, as the case may be.
3. The Closing. The Closing shall take place at the offices of Venture
Law Group, located at 2800 Sand Hill Road, Menlo Park, CA 94025, or at such
other location as Seller and Purchaser may agree, at 10:00 a.m., Pacific Time,
on the Closing Date.
3.1 Instruments of Transfer and Sale. At the Closing, Seller
shall deliver to Purchaser such bills of sale, endorsements, assignments and
other good and sufficient instruments of transfer, conveyance and assignment, in
form customary for such transactions and reasonably satisfactory to Purchaser's
counsel, as shall be effective to vest in Purchaser good title to the Purchased
Assets (other than assets subject to equipment leases, as to which a valid
leasehold interest will be conveyed by assignment of such equipment leases).
3.2 Other Documents. Each party shall deliver to the other at
the Closing such other documents, certificates, schedules, agreements and
instruments required by this Agreement to be delivered at such time.
4. Representation and Warranties of Seller. Seller hereby represents
and warrants to Purchaser as follows:
4.1 Organization. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of California.
4.2 Authorization. Seller has all requisite power and
authority to execute and deliver this Agreement and, at the time of the Closing,
will have all requisite power and authority to carry out the transactions
contemplated by this Agreement. All necessary corporate action on the part of
the Seller has been taken to authorize the execution and delivery of this
Agreement. This Agreement has been duly and validly executed and delivered by
Seller and constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles or the
exercise of judicial discretion in accordance with such principles.
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<PAGE> 6
4.3 No Conflicts; Consents. The execution and the delivery of
this Agreement by Seller do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, result in a breach of, constitute a default (with or without notice or
lapse of time, or both) under or violation of, or result in the creation of any
lien, charge or encumbrance pursuant to, (i) any provision of the Articles of
Incorporation or Bylaws of Seller, (ii) any judgment, order, decree, rule, law
or regulation of any court or governmental authority, or (iii) any provision of
any agreement, instrument or understanding to which Seller is a party or by
which Seller or any of its properties or assets is bound or affected, nor will
such actions give to any other person or entity any interests or rights of any
kind, including rights of termination, acceleration or cancellation, in or with
respect to any of the Purchased Assets. Except as set forth in certain
Contracts, no consent of any third party or any governmental authority is
required to be obtained on the part of Seller to permit the consummation of the
transactions contemplated by this Agreement.
4.4 Disclaimer of Warranty. THE PURCHASED ASSETS ARE SOLD AS
IS, WHERE IS, AND SELLER MAKES NO WARRANTIES RELATING TO THE PURCHASED ASSETS,
EXPRESS OR IMPLIED, AND EXPRESSLY EXCLUDES ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
5. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
5.1 Organization. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California.
5.2 Authorization. Purchaser has all requisite power and
authority to execute and deliver this Agreement and, at the time of the Closing,
will have all requisite power and authority to carry out the transactions
contemplated by this Agreement. All necessary corporate action on the part of
Purchaser has been taken to authorize the execution and delivery of the
Agreement. This Agreement has been duly and validly executed by Purchaser and
constitutes a valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles or the exercise
of judicial discretion in accordance with such principles.
5.3 No Conflicts; Consents. The execution and delivery of this
Agreement by Purchaser do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, result in a breach of, constitute a default (with or without notice or
lapse of time, or both) under or violation of, or result in the creation of any
lien, charge or encumbrance pursuant to, (i) any provision of the Articles of
Incorporation or Bylaws of Purchaser, (ii) any judgment, order. rule, law or
regulation of any court or governmental authority, foreign or domestic, or (iii)
any provision of any agreement, instrument or understanding to which Purchaser
is
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<PAGE> 7
a party or by which Purchaser is bound. Except as set forth in certain
Contracts, no consent of any third party or any governmental authority is
required to be obtained on the part of Purchaser to permit the consummation of
the transactions contemplated by this Agreement.
6. Covenants of Seller.
6.1 Regulatory Approvals. Prior to the Closing, Seller will
execute and file, or join in the execution and filing, of any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any governmental entity that may be reasonably required,
or that Purchaser may reasonably request, in connection with the consummation of
the transactions contemplated by this Agreement. Seller will use its best
efforts to obtain all such authorizations, approvals and consents. Seller shall
take any action reasonably necessary to assist Purchaser in complying with
Article 6 of the Uniform Commercial Code.
6.2 Satisfaction of Conditions Precedent. Seller will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent to
the Closing hereunder, and to cause the transactions contemplated hereby to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties (subject to Section 2.5) and to
make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby.
7. Covenants of Purchaser.
7.1 Regulatory Approvals. Prior to the Closing, Purchaser will
execute and file, or join in the execution and filing, of any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any governmental entity that may be reasonably required
in connection with the consummation of the transactions contemplated by this
Agreement. Purchaser will use its best efforts to obtain all such
authorizations, approvals and consents.
7.2 Satisfaction of Conditions Precedent. Purchaser will use
its best efforts to satisfy or cause to be satisfied all the conditions
precedent to the Closing hereunder, and to cause the transactions contemplated
hereby to be consummated, and, without limiting the generality of the foregoing,
to obtain all consents and authorizations of third parties and to make all
filings with, and give all notices to, third parties which may be necessary or
reasonably required on its part in order to effect the transaction contemplated
hereby.
7.3 Discharge of Assumed Liabilities. Subject to and upon the
terms and conditions of this Agreement Purchaser shall pay, perform and
discharge, according to their terms, the Assumed Liabilities.
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<PAGE> 8
8. Conditions to Closing.
8.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions to be performed by such
party at the Closing are, at the option of such party, subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) No order shall have been entered, and not
vacated, by a court or administrative agency of competent jurisdiction, in any
action or proceeding which enjoins, restrains or prohibits the sale of the
Purchased Assets or consummation of any other transaction contemplated hereby.
(b) All permits, authorizations, approvals and orders
required to be obtained under all applicable statutes, codes, ordinances, rules
and regulations in connection with the transactions contemplated hereby shall
have been obtained and shall be in full force and effect at the Closing Date.
(c) There shall be no litigation pending or
threatened by any regulatory body or private party in which (i) an injunction is
or may be sought against the transactions contemplated hereby, or (ii) relief is
or may be sought against any party hereto as a result of this Agreement and in
which. in the good faith judgment of the Board of Directors of either Purchaser
or Seller (relying on the advice of their respective legal counsel), such
regulatory body or private party has the probability of prevailing and such
relief would have a material adverse affect upon such party.
(d) The parties mutual execution of following
documents: (i) the Convertible Note Purchase Agreement by and between
AccelGraphics. Inc. and Kubota Corporation; and (ii) the Rights Agreement by and
between AccelGraphics, Inc. and Kubota Corporation.
8.2 Conditions to Obligations of Seller. The obligations of
Seller to effect the transactions to be performed by it at the Closing are, at
the option of Seller, subject to the satisfaction at or prior to the Closing of
the following additional conditions:
(a) All of the representations and warranties of
Purchaser set forth in Section 5 hereof shall be true on and as of the Closing
Date with the same force and effect as if they had been made at the Closing,
except for changes contemplated by this Agreement, and Purchaser shall have
delivered to Seller a certificate to such effect dated the Closing Date and
signed by the President or a Vice President of Purchaser.
(b) All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Purchaser at or prior to the
Closing shah have been duly complied with and performed, and Purchaser shall
have delivered to Seller a certificate to such effect dated the Closing Date and
signed by the President or a Vice President of Purchaser.
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<PAGE> 9
8.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the transactions to be performed by it at the Closing are,
at the option of Purchaser, subject to the satisfaction at or prior to the
Closing of the following additional conditions:
(a) All the representations and warranties of Seller
set forth in Section 4 hereof shah be true on and as of the Closing Date with
the same force and effect as if they had been made at the Closing, except for
changes contemplated by this Agreement, and Seller shah have delivered to
Purchaser a certificate to such effect dated the Closing Date and signed by the
President of Seller.
(b) All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Seller at or prior to the
Closing shall have been, duly complied with and performed, and Seller shall have
delivered to Purchaser a certificate to such effect dated the Closing Date and
signed by the President or a Vice President of Seller.
8.4 The Closing Schedule. Purchaser and Seller shall strictly
adhere to the closing schedule set forth below:
(a) Purchaser will execute and deliver to Seller this
Agreement by December 12, 1994.
(b) Purchaser will have until December 16, 1994 to
inform Seller, in writing of any Purchased Assets that Purchaser will not
purchase under the terms of this Agreement ("Excluded Asset(s)").
(i) If Purchaser has not identified to
Seller by December 16, 1994, any Excluded Asset(s), then the parties will
proceed with the Closing.
(ii) If Purchaser identifies to Seller in
writing, by December 16, 1994, certain Excluded Asset(s), then both Purchaser
and Seller will have until December 22, 1994 to terminate this Agreement in its
entirety, upon either party's determination that the Excluded Asset(s) will
materially impact the viability of the Purchaser's business plan. Upon the close
of business on December 22, 1994, if neither party has elected to terminate the
Agreement, the Excluded Asset(s) will be removed from the applicable exhibits
and the purchase price will be equitably adjusted.
(c) Regardless of whether Purchaser identifies to
Seller on or before December 16, 1994, Excluded Asset(s), Purchaser shall have
until the close of business on December 22, 1994 to terminate this Agreement in
its entirety.
(d) The formal Closing will be completed by December
28, 1994, as evidenced by Purchaser fulfilling its payment obligations as set
forth in Section 2.3.
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<PAGE> 10
9. Post-Closing Matters.
9.1 Accounts Receivable. Purchaser shall promptly remit to
Seller any payments received by Purchaser following the Closing Date with
respect to any accounts receivable of Seller accrued as of the Closing Date.
Seller shall promptly remit to Purchaser any payments received by Seller
following the Closing Date with respect to any accounts receivable of the Seller
Business accruing from and after the Closing Date.
9.2 Incidental Expenses. Purchaser shall promptly remit to
Seller any Trade Payables or Incidental Expenses incurred by Seller on
Purchaser's behalf, subsequent to the Closing Date.
9.3 Further Assurances of Seller. Seller shall, from time to
time, at the request of Purchaser, and without further consideration, execute
and deliver such instruments of transfer, conveyance and assignment in addition
to those delivered pursuant to Section 8 hereof, and take such other actions, as
may be reasonably necessary to assign, transfer, convey and vest in Purchaser,
and to put Purchaser in possession of, the Purchased Assets, including but not
limited to Seller's execution of any patent assignment documentation.
9.4 Further Assurances of Purchaser. Purchaser shall, from
time to time at the request of Seller, and without further consideration,
execute and deliver such instruments of assumption, and take such other action,
as may be reasonably necessary to effectively confirm the assumption by
Purchaser of the Assumed Liabilities.
10. Termination of Agreement.
10.1 Termination by Purchaser. In addition to the termination
provisions set forth in Section 8.4, this Agreement may be terminated by
Purchaser at any time before the Closing upon written notice to Seller,
specifying the basis for such termination, if (i) Seller shall have breached in
any material respect any of its respective covenants or agreements contained in
this Agreement, (ii) any representation or warranty of Seller contained in this
Agreement shall have been materially inaccurate, or (iii) through no fault of
Purchaser, the Closing shall not have occurred on or before December 30, 1994.
10.2 Termination by Seller. In addition to the termination
provisions set forth in Section 8.4, this Agreement may be terminated by Seller
at any time before the Closing upon written notice to Purchaser, specifying the
basis for such termination, if (i) Purchaser shall have breached in any material
respect any of its covenants or agreements contained in this Agreement, (ii) any
representation or warranty of Purchaser contained in this Agreement shall have
been materially inaccurate, or (iii) through no fault of Seller, the Closing
shall not have occurred on or before December 30, 1994.
10.3 Mutual Consent. This Agreement may be terminated at any
time before the Closing, by the mutual written consent of Purchaser and Seller.
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<PAGE> 11
10.4 Effect of Termination. Upon any termination of this
Agreement pursuant to the provisions of Section this Section 10 or Section 8.4,
all parties hereto shall be relieved of all further obligations under this
Agreement.
11. Non-Survival of Representations and Warranties. All of the
representations and warranties contained in this Agreement shall terminate upon
completion of the Closing.
12. General.
12.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
(irrespective of its choice of law principles).
12.2 Assignment; Binding upon Successors and Assigns. Neither
of the parties hereto may assign any of its rights or obligations hereunder
without the prior written consent of the other party, which consent shall not be
unreasonably withheld. This Agreement will be binding upon and will inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
12.3 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further agree
to replace such invalid or unenforceable provision of this Agreement with a
valid and enforceable provision which will achieve. to the extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
12.4 Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersedes all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
12.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument.
12.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively ), only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof for default in payment of any amount
due hereunder or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
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<PAGE> 12
12.7 Notices. All notices and other communications hereunder
will be in writing and will be deemed given (i) three (3) days after being
postmarked, if deposited in the U.S. Mail, postage prepaid, (ii) upon receipt if
delivered personally or mailed by registered or certified mail, (iii) the next
business day following dispatch if sent by overnight courier, or (iv) upon
dispatch if transmitted by telecopier or other means of facsimile transmission
and confirmed by a copy delivered in accordance with clause (ii) or (iii), in
each case properly addressed to the other party at its address as set forth
above or at such other address as the party shall have specified by ten (10)
days' prior written notice.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
KUBOTA GRAPHICS CORPORATION
By: /s/ Kubota Graphics Corporation
----------------------------------
Title: CFO
----------------------------------
ACCELGRAPHICS, INC.
By: /s/ Jeffrey W. Dunn
----------------------------------
Title: President & CEO
----------------------------------
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<PAGE> 13
AMENDMENT NUMBER ONE TO THE
ASSET AND ACQUISITION AGREEMENT
This Amendment Number One (the "Amendment") to the Asset and Acquisition
Agreement dated December 9, 1994 (the "Agreement") is entered into this
twenty-sixth (26th) day of December, 1994, by and between Kubota Graphics
Corporation ("Kubota Graphics"), located at 2630 Walsh Avenue, Santa Clara, CA
95051-0905 and AccelGraphics, Inc. ("AccelGraphics"), located at 2630 Walsh
Avenue, Santa Clara, CA 95051-0905.
WHEREAS, the parties have entered into the above referenced Agreement; and
WHEREAS, the parties desire to amend the Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Delete the title of Exhibit Dand insert the following in lieu thereof:
"Sierra 32Z and 48ZI and Associated Imaging Libraries."
2. Amend Exhibit D of the Agreement by adding the following language as the
first paragraph:
"32Z product is defined as a PCI based graphics product based on Kubota
Graphics' announced ActionGraphics 300 product, with additional frame buffer
memory (32 planes total) and imaging support (contrast enhancement and bilinear
interpretation)."
3. Re-state subsection number one in Exhibit G-1, to read as follows:
"Sierra 32Z and 48ZI Technology as defined in Exhibit D and subject to the terms
of the Agreement." The 32Z and 48ZI products also include all Sierra OSF/1
source code and the source code for the drivers, device specific code and
associated driver documentation for the Sierra software.
4. This Amendment and the Agreement as modified by this Amendment Number One,
constitute the entire agreement between the parties concerning the subject
matter of this Agreement.
5. Other Terms and Conditions. Except as amended above, all other terms and
conditions of the Agreement shall remain in full force and effect. In case of
any conflict between the terms of this Amendment Number One and the Agreement,
the terms in this Amendment Number One shall govern.
KUBOTA GRAPHICS CORPORATION ACCELGRAPHICS, INC.
By: /s/ PS Melman By: /s/ Jeffrey W. Dunn
------------------------ ------------------------
Name: PS Melman Name: Jeffrey W. Dunn
------------------------ ------------------------
Title: CFO Title: President & CEO
------------------------ ------------------------
Date: 12/26/94 Date: 12/26/94
------------------------ ------------------------
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<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF ACCELGRAPHICS, INC.
The undersigned, Jeffrey W. Dunn and Michael W. Hall, hereby certify
that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of AccelGraphics, Inc. (the "CORPORATION").
TWO: The Articles of Incorporation of the Corporation shall be amended
and restated to read in full as follows:
"ARTICLE I
The name of the Corporation is AccelGraphics, Inc.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
(A) Classes of Stock. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED
STOCK". The total number of shares which the Corporation is authorized to issue
is Forty Five Million (45,000,000) shares. Twenty Five Million (25,000,000)
shares shall be Common Stock and Twenty Million (20,000,000) shares shall be
Preferred Stock.
(B) Rights, Preferences, Privileges and Restrictions of Preferred
Stock. The Preferred Stock authorized by these Articles of Incorporation may be
issued from time to time in series. The rights, preferences, privileges and
restrictions granted to and imposed on the Series A Preferred Stock, which
series shall consist of Six Million Nine Hundred Fifty Four Thousand (6,954,000)
shares, the Series A-1 Preferred Stock, which series shall consist of Six
Million Nine Hundred Fifty Four Thousand (6,954,000) shares, the Series B
Preferred Stock, which series shall consist of Two Million Two Hundred Thousand
(2,200,000) shares, and the Series B-1 Preferred Stock, which series shall
consist of Two Million Two Hundred Thousand (2,200,000) shares, are as set forth
below in this Part (B) of Article III.
<PAGE> 2
Except as to the Series A, Series A-1, Series B, and Series B-1 Preferred Stock
and except as otherwise provided in these Articles of Incorporation, the Board
of Directors is hereby authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
additional series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them. The Board of Directors,
except as otherwise provided in these Articles of Incorporation, is also
authorized to decrease the number of shares of any series, subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
1. Dividend Provisions. The holders of shares of Series A,
Series A-1, Series B, and Series B-1 Preferred Stock shall be entitled to
receive dividends, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of the Corporation) on the Common Stock of the Corporation, at the rate of
$0.083333333 per share for each share of Series A and Series A-1 Preferred Stock
and $0.15 per share for each share of Series B and Series B-1 Preferred Stock
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations) per annum or, if greater (as determined on an as-converted
basis), an amount equal to that paid on any other outstanding shares of the
Corporation whenever funds are legally available therefor, payable quarterly
when, as and if declared by the Board of Directors. Such dividends shall not
be cumulative.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series A, Series A-1, Series B, and Series B-1 Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of Common Stock, by reason of their
ownership thereof, an amount per share equal to $0.83333333 for each outstanding
share of Series A and Series A-1 Preferred Stock, respectively, (as adjusted for
stock splits, stock dividends and recapitalizations ) (the "ORIGINAL SERIES A
AND SERIES A-1 ISSUE PRICE") and $1.50 for each outstanding share of Series B
and Series B-1 Preferred Stock ( as adjusted for stock splits, stock dividends
and recapitalizations) (the "ORIGINAL SERIES B AND SERIES B-1 ISSUE PRICE") plus
an amount equal to declared but unpaid dividends thereon. If, upon the
occurrence of such an event, the assets and property thus distributed among the
holders of the Series A, Series A-1, Series B, and Series B-1 Preferred Stock
shall be insufficient to permit the payment to such holders of the full
preferential amount, then the assets and property of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A, Series A-1, Series B, and Series B-1 Preferred Stock in proportion to
the aggregate preferential amounts owed such holders upon a liquidation,
dissolution or winding up of the Corporation.
(b) After the distributions described in subsections
(a) above have been paid in full, the remaining assets of the Corporation
available for distribution to shareholders shall be distributed among the
holders of Series A, Series A-1, Series B, and Series B-1 Preferred
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<PAGE> 3
Stock and Common Stock pro rata based on the number of shares of Common Stock
held by each (assuming conversion of all such Preferred Stock).
(c) For purposes of this Section 2, (i) any
acquisition of the Corporation by means of merger or other form of corporate
reorganization in which the shareholders of the Corporation do not own a
majority of the outstanding shares of the surviving corporation or (ii) a sale
of all or substantially all of the assets of the Corporation shall be treated as
a liquidation, dissolution or winding up of the Corporation and shall entitle
the holders of Preferred Stock and Common Stock to receive at the closing cash,
securities or other property as specified in Sections 2(a) and 2(b) above;
provided that in connection with the distribution of assets contemplated by this
subsection (c) the holders of Series A and Series A-1 Preferred Stock only shall
be entitled to receive a total of $3.33333332 per share (which amount includes
the Original Series A and Series A-1 Issue Price) and the holders of Series B
and Series B-1 Preferred Stock only shall be entitled to receive a total of
$6.00 per share (which amount includes the Original Series B and Series B-1
Issue Price), and if there are any remaining proceeds such remaining proceeds
shall be distributed, among the holders of Common Stock pro rata based on the
number of shares of Common Stock held by each such shareholder.
(d) Any securities to be delivered to the holders of
the Preferred Stock and/or Common Stock pursuant to Section 2(c) above shall be
valued as follows:
(i) Securities not subject to investment
letter or other similar restrictions on free marketability:
(A) If traded on a national
securities exchange or the Nasdaq Stock Market, the value shall be deemed to be
the average of the closing prices of the securities on such exchange over the
30-day period ending three (3) days prior to the closing;
(B) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
prices over the 30-day period ending three (3) days prior to the closing; and
(C) If there is no active public
market, the value shall be the fair market value thereof, as determined in good
faith by the Board of Directors of the Corporation.
(ii) The method of valuation of securities
subject to investment letter or other restrictions on free marketability shall
be to make an appropriate discount from the market value determined as above in
(i)(A), (B) or (C) to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors of the Corporation.
(e) In the event the requirements of subsection 2(c)
are not complied with, the Corporation shall forthwith either:
(i) cause such closing to be postponed until
such time as the requirements of Section 2(c) have been complied with, or
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<PAGE> 4
(ii) cancel such transaction, in which event
the rights, preferences, privileges and restrictions of the holders of Preferred
Stock shall revert to and be the same as such rights, preferences, privileges
and restrictions existing immediately prior to the date of the first notice
referred to in Section 2(f) hereof.
(f) The Corporation shall give each holder of record
of Preferred Stock written notice of such a Section 2(c) transaction not later
than ten (10) days prior to the shareholders' meeting called to approve such
transaction, or ten (10) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction, and the Corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than ten (10) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of a majority of the Series A, Series A-1,
Series B, and Series B-1 Preferred Stock then outstanding.
3. Conversion. The holders of the Series A, Series A-1, Series
B, and Series B-1 Preferred Stock shall have conversion rights as follows (the
"CONVERSION RIGHTS"):
(a) Right to Convert. Each share of Series A, Series
A-1, Series B, and Series B-1 Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Series A,
Series A-1, Series B, and Series B-1 Preferred Stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing
$0.83333333 for each share of Series A and Series A-1 Preferred Stock and $1.50
for each share of Series B and Series B-1 Preferred Stock, by the Conversion
Price at the time in effect for such shares. The initial "CONVERSION PRICE" for
shares of Series A and Series A-1 Preferred Stock shall be $0.83333333 per share
and for each share of Series B and Series B-1 Preferred Stock shall be $1.50 per
share; provided, however, in either case, that such Conversion Prices shall be
subject to adjustment as set forth below.
(b) Automatic Conversion.
(i) Each share of Series A, Series A-1,
Series B, and Series B-1 Preferred Stock shall automatically be converted into
shares of Common Stock at the Conversion Price at the time in effect for such
series of Preferred Stock immediately upon the consummation of the Corporation's
sale of its Common Stock in a bona fide, firm commitment underwriting pursuant
to a registration statement on Form S-1 under the Securities Act of 1933, as
amended, which results in aggregate gross cash proceeds to the Corporation in
excess of $7,500,000 and the public offering price of which is not less than
$4.67 per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization).
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(ii) Conversion Into Series A-1 and Series
B-1 Preferred.
(A) Each share of Series A Preferred
Stock held by a Non-Participating Investor who does not purchase such holder's
full Pro Rata Share of New Securities in a Series A Dilutive Issuance, in
accordance with the procedures set forth in Section 3(b)(ii)(C) hereof, shall
automatically be converted into a share of Series A-1 Preferred Stock at a
conversion rate of one fully paid and nonassessable share of Series A-1
Preferred Stock for each share of Series A Preferred Stock held by such holder.
Each share of Series B Preferred Stock held by a Non-Participating Investor who
does not purchase such holder's full Pro Rata Share of New Securities in a
Series B Dilutive Issuance, in accordance with the procedures set forth in
Section 3(b)(ii)(C) hereof, shall automatically be converted into a share of
Series B-1 Preferred Stock at a conversion rate of one fully paid and
nonassessable share of Series B-1 Preferred Stock for each share of Series B
Preferred Stock held by such holder.
(B) For purposes of this Section
3(b)(ii), the following definitions shall apply:
(1) "NEW SECURITIES" shall
mean any Additional Stock of Common Stock, as such term is defined in Section
3(d)(ii) below, sold in any financing transaction after the Initial Purchase
Date (as defined in Section 3(d)(i)(A) below).
(2) "PRO RATA SHARE" shall
mean the ratio of (X) the sum of the number of shares of Common Stock issuable
upon the conversion of the particular series of Preferred Stock held by a holder
of such series of Preferred Stock to (Y) the sum of the total number of shares
of Common Stock outstanding (assuming conversion of all of the outstanding
shares of Preferred Stock of the Corporation).
(3) "PARTICIPATING
INVESTOR" shall mean any holder of Series A Preferred Stock that agrees to
purchase at least its Pro Rata Share of a Series A Dilutive Issuance or a holder
of Series B Preferred Stock that agrees to purchase at least its Pro Rata share
of a Series B Dilutive Issuance, in each case pursuant to Section 3(b)(ii)(C)
hereof.
(4) "NON-PARTICIPATING
INVESTOR" shall mean any holder of Series A Preferred Stock or Series B
Preferred Stock that is not a Participating Investor.
(5) "SERIES A DILUTIVE
ISSUANCE" shall mean an issuance of New Securities for a consideration per share
less than the Conversion Price of the Series A Preferred Stock in effect on the
date of and immediately prior to such issue.
(6) "SERIES B DILUTIVE
ISSUANCE" shall mean an issuance of New Securities for a consideration per share
less than the Conversion Price of the Series B Preferred Stock in effect on the
date of and immediately prior to such issue.
(C) In the event that the
Corporation shall propose to undertake a Series A Dilutive Issuance or Series B
Dilutive Issuance, it shall give each holder of the particular series of
Preferred Stock, as appropriate, a written notice (the "PAY-TO-PLAY
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<PAGE> 6
NOTICE") of its intention to sell New Securities at least thirty (30) days prior
to the anticipated date of first sale of such New Securities (the "NEW
SECURITIES CLOSING DATE"). The Pay-to-Play Notice shall describe the type of New
Securities, the price of such New Securities and the general terms upon which
the Corporation proposes to issue such New Securities. Each holder of such
series of Preferred Stock shall have a right to purchase its Pro Rata Share of
such New Securities (a "PURCHASE RIGHT"), which Purchase Right shall expire
fifteen (15) days prior to the New Securities Closing Date. Each holder of such
series of Preferred Stock shall be entitled to exercise its Purchase Right by
providing written notice to the Corporation that such holder agrees to become a
Participating Investor in accordance with the terms specified in the Pay-to-Play
Notice. Any holder of the particular series of Preferred Stock (in the event of
a Series A Dilutive Issuance or Series B Dilutive Issuance, as appropriate) who
fails to provide such written notice to the Corporation prior to the expiration
of such holder's Purchase Right shall be deemed to be a Non-Participating
Investor.
(D) Upon the conversion of Series A
or Series B Preferred Stock into Series A-1 or Series B-1 Preferred Stock held
by a Non-Participating Investor as set forth herein, such shares of Series A or
Series B Preferred Stock shall no longer be outstanding on the books of the
Corporation and the Non-Participating Investor shall be treated for all purposes
as the record holder of shares of Series A-1 Preferred Stock or Series B-1
Preferred Stock, as appropriate, as of the date of closing of the applicable
Series A Dilutive Issuance or Series B Dilutive Issuance.
(c) Mechanics of Conversion. Before any holder of
Series A, Series A -1, Series B, and Series B-1 Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for such series of Preferred Stock,
and shall give written notice by mail, postage prepaid, to the Corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office such holder of
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offer of securities registered pursuant to the Securities Act of
1933, as amended, the conversion will be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, unless
otherwise designated in writing by the holders of such Preferred Stock, in which
event the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
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(d) Conversion Price Adjustments of Preferred Stock.
(i) (A) If the Corporation, at any time
or from time to time after the date of the first issuance of Series A Preferred
Stock (the "SERIES A INITIAL PURCHASE DATE") or the first issuance of Series B
Preferred Stock (the "SERIES B INITIAL PURCHASE DATE"), shall issue any
Additional Stock (as defined below) without consideration or for a consideration
per share less than the Conversion Price for the Series A Preferred Stock or
Series B Preferred Stock in effect immediately prior to the issuance of such
Additional Stock, the Conversion Price for the Series A and/or the Series B
Preferred Stock in effect immediately prior to each such issuance shall
forthwith be adjusted to a price determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of shares
of Common Stock which the aggregate consideration received by the Corporation
for the total number of shares of Additional Stock so issued would purchase at
such Conversion Price, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of such shares of Additional Stock so issued; provided that for the
purposes of this subsection, all shares of Common Stock issuable upon conversion
of outstanding Preferred Stock shall be deemed to be outstanding, and
immediately after any Additional Stock is deemed issued, such Additional Stock
shall be deemed to be outstanding.
(B) No adjustment of the Conversion
Price for the Series A or Series B Preferred Stock shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections 3(d)(i)(E)(3) and 3(d)(i)(E)(4) below, no
adjustment of such Conversion Price pursuant to this subsection 3(d)(i) shall
have the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(C) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any underwriting
or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of
the Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance,
whether before, on or after the Series A Initial Purchase Date or Series B
Initial Purchase Date, of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such
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<PAGE> 8
convertible or exchangeable securities (which are not excluded from the
definition of Additional Stock), the following provisions shall apply:
(1) The aggregate maximum
number of shares of Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
3(d)(i)(C) and 3(d)(i)(D) above), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby.
(2) The aggregate maximum
number of shares of Common Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conver sion or exchange thereof shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration, if any,
received by the Corporation for any such securities and related options or
rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in subsections 3(d)(i)(C) and 3(d)(i)(D)
above).
(3) In the event of any
change in the number of shares of Common Stock deliverable or any increase in
the consideration payable to the Corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A or Series
B Preferred Stock obtained with respect to the adjustment which was made upon
the issuance of such options, rights or securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.
(4) Upon the expiration of
any such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price of the Series A or Series B
Preferred Stock obtained with respect to the adjustment which was made upon the
issuance of such options, rights or securities or options or rights related to
such securities, and any subsequent adjustments based thereon, shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
only the number of shares of Common Stock actually issued upon the exercise of
such options or rights, upon the conversion or exchange of such
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<PAGE> 9
securities or upon the exercise of the options or rights related to such
securities shall continue to be deemed to be issued.
(5) All Common Stock
deemed issued pursuant to this subsection 3(d)(i)(E) shall be considered issued
only at the time of its deemed issuance and any actual issuance of such stock
shall not be an actual issuance or a deemed issuance of the Corporation's Common
Stock under the provisions of this Section 3.
(F) No adjustment of the Conversion
Price for the Series A-1 or Series B-1 Preferred Stock shall be made upon the
issuance of any Additional Stock without consideration or for consideration per
share less than the Conversion Price of the Series A-1 or Series B-1 Preferred
Stock in effect immediately prior to the issuance of such Additional Stock.
(ii) "ADDITIONAL STOCK" shall mean any
shares of Common Stock issued (or deemed to have been issued pursuant to
subsection 3(d)(i)(E)) by the Corporation on or after the Series A Initial
Purchase Date or Series B Initial Purchase Date other than shares of Common
Stock issued or issuable
(A) pursuant to a transaction
described in subsection 3(d)(iii) below,
(B) up to 4,000,000 shares of Common
Stock (as adjusted for stock splits, stock dividends and recapitalizations) to
officers, directors, employees and consultants of the Corporation directly or
pursuant to benefit plans approved by the shareholders and directors of the
Corporation,
(C) in connection with capital
equipment leases, commercial debt financing, technology acquisitions and other
comparable transactions approved by the Board of Directors, or
(D) upon conversion of the Series A,
Series A-1, Series B, or Series B-1 Preferred Stock.
(iii) In the event the Corporation should at
any time or from time to time after the Series A Initial Purchase Date or Series
B Initial Purchase Date fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of each series of Series A, Series A-1, Series B and Series B-1 Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
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<PAGE> 10
proportion to such increase of outstanding shares determined in accordance with
subsection 3(d)(i)(E).
(iv) If the number of shares of Common Stock
outstanding at any time after the Series A Initial Purchase Date or Series B
Initial Purchase Date is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price for each series of Series A, Series A-1, Series B and Series
B-1 Preferred Stock shall be appropri ately increased so that the number of
shares of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in subsection 3(d)(iii),
then, in each such case for the purpose of this subsection 3(e), the holders of
Series A, Series A-1, Series B and Series B-1 Preferred Stock shall be entitled
to a proportionate share of any such distribution as though they were the
holders of the number of shares of Common Stock of the Corporation into which
their shares of Series A, Series A-1, Series B and Series B-1 Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the Corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to
time there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in Section 2 or this Section 3) provision shall be made so that the
holders of each series of Series A, Series A-1, Series B and Series B-1
Preferred Stock shall thereafter be entitled to receive upon conversion of such
series of Series A, Series A-1, Series B and Series B-1 Preferred Stock the
number of shares of stock or other securities or property of the Company or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 3
with respect to the rights of the holders of each series of Series A, Series
A-1, Series B and Series B-1 Preferred Stock after the recapitalization to the
end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of such series of Series A, Series A-1, Series B and Series B-1
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(g) No Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of each series of Series A, Series A-1, Series
B and Series B-1 Preferred Stock against impairment.
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(h) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued
upon conversion of the Preferred Stock, and the number of shares of Common Stock
to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment
or readjustment of any Conversion Price of any series of Preferred Stock
pursuant to this Section 3, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such series of Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of a
share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall mail to each holder of Preferred Stock, at least 20 days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Series A-1 and Series B-1 Preferred Stock
solely for the purpose of effecting the conversion of the shares of Series A
and Series B Preferred Stock, respectively, such number of its shares of Series
A-1 and Series B-1 Preferred Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A and Series B
Preferred Stock; and if at any time the number of authorized but unissued
shares of Series A-1 and Series B-1 Preferred Stock shall not be sufficient to
effect the conversion of all then outstanding shares of such Series A and
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Series B Preferred Stock, respectively, in addition to such other remedies as
shall be available to the holder of such Series A and/or Series B Preferred
Stock, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Series A-1 and/or Series B-1 Preferred Stock to such number of shares as shall
be sufficient for such purposes.
(k) Notices. Any notice required by the provisions of
this Section 3 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
4. Redemption Rights.
(a) Redemption. On or at any time after the sixth
anniversary of the Series A Initial Purchase Date for the Series A or Series A-1
Preferred Stock or the Series B Initial Purchase Date for the Series B or Series
B-1 Preferred Stock, the Corporation may redeem all or a portion of the then
outstanding shares of each series of Preferred Stock at the Original Series A
and Series A-1 Issue Price plus declared and unpaid dividends and Original
Series B and Series B-1 Issue Price plus declared and unpaid dividends (the
"REDEMPTION PRICE"). In the event the Corporation determines to redeem a portion
of the outstanding shares of a particular series of Preferred Stock, the
Corporation shall effect such redemption pro rata according to the number of
shares held by each holder thereof. In addition, on or at any time after the
sixth anniversary of the Series A Initial Purchase Date for the Series A or
Series A-1 Preferred Stock or on or after the sixth anniversary of the Series B
Initial Purchase Date for the Series B or Series B-1 Preferred Stock, at the
option of and upon the written request of the holders of not less than sixty
percent (60%) of the respective series of Preferred Stock then outstanding and
at such dates as such holders may so elect (the "REDEMPTION DATE"), the
Corporation shall redeem one-third of the outstanding shares of the respective
series of Preferred Stock that are requested to be redeemed (or any lesser
percentage as such holders shall elect) per year until all of such shares of
Preferred Stock that are requested to be redeemed are redeemed by paying
therefor in cash the Redemption Price. In the event that the Corporation is
unable on any Redemption Date to effect the redemption of all such series of
Preferred Stock for which redemption is so requested pursuant to this Section
4(a), the Corporation shall effect such redemption pro rata according to the
number of shares held by each requesting holder thereof. Notwithstanding the
foregoing, however, holders of each series of Preferred Stock shall be entitled
to request redemption only one time per calendar year.
(b) Notice for Company Initiated Redemption. With
respect to a redemption of Preferred Stock initiated by the Corporation, at
least 30 days' previous written notice by certified or registered mail, postage
prepaid, shall be given to the holders of record of the Preferred Stock to be
redeemed, such notice to be addressed to each such shareholder at the address of
such holder given to the Corporation for the purpose of notice, or if no such
address appears or is so given, at the place where the principal office of the
Corporation is located. Such notice shall state the Redemption Date, the
Redemption Price, the then current Conversion Rate and the date of termination
of the right to convert (which date shall not be earlier than thirty (30) days
and not later than sixty (60) days after the above written notice by mail has
been given) and
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shall call upon such holder to surrender to the Corporation on said date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On or after the Redemption Date stated
in such notice, the holder of each share of Preferred Stock called for
redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price for the series of Preferred
Stock surrendered. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If such notice of redemption shall have been
duly given, and if on the Redemption Date funds necessary for the redemption
shall be available therefor, then, as to any certificates evidencing any
Preferred Stock so called for redemption and not surrendered, all rights of the
holders of such shares so called for redemption and not surrendered shall cease
with respect to such shares, except only the right of the holders to receive the
Redemption Price for such series of Preferred Stock which they hold, without
interest, upon surrender of their certificates therefor.
(c) Notice for Holder Initiated Redemption.
(i) With respect to a redemption initiated
by the holders of Preferred Stock, at least 30 but no more than 60 days prior to
the Redemption Date of the Series A, Series A-1, Series B and Series B-1
Preferred Stock, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A, Series A-1, Series
B or Series B-1 Preferred Stock to be redeemed, at the address last shown on the
records of the Corporation for such holder or given by the holder to the
Corporation for the purpose of notice, notifying such holder of the redemption
to be effected, specifying the number of shares to be redeemed from such holder,
the Redemption Date, the Redemption Price, the place at which payment may be
obtained and the date on which such holder's Conversion Rights (as previously
defined) as to such shares terminate and calling upon such holder to surrender
to the Corporation, in the manner and at the place designated, the certificate
or certificates representing the shares to be redeemed (the "REDEMPTION
NOTICE"). Except as provided in Section (4)(c)(ii) below, on or after the
Redemption Date, each holder of Series A, Series A-1, Series B or Series B-1
Preferred Stock to be redeemed shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(ii) From and after the Redemption Date,
unless there shall have been a default in payment of the Redemption Price, all
dividends on the Series A, Series A-1, Series B or Series B-1 Preferred Stock
designated for redemption in the Redemption Notice shall cease to accrue, all
rights of the holders of such shares (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Series A, Series A-1, Series B and Series
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B-1 Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Series A, Series A-1, Series B, or Series B-1 Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares in accordance with
the provisions of Section (6)(c) hereof. The shares of Series A, Series A-1,
Series B, and Series B-1 Preferred Stock not redeemed shall remain outstanding
and entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Company are legally available for the
redemption of shares of Series A, Series A-1, Series B, and Series B-1 Preferred
Stock, such funds will immediately be used to redeem the balance of the shares
which the Company has become obligated to redeem on any Redemption Date but
which it has not redeemed.
(d) Trust Fund. On or prior to any Redemption Date,
the Corporation shall deposit, with any bank or trust company in the State of
California, as a trust fund, a sum sufficient to redeem, on the Redemption Date
thereof, the shares called for redemption, with irrevocable instructions and
authority to the bank or trust company to give the notice of redemption thereof
(or to complete the giving of such notice if theretofore commenced) and to pay,
on or after the Redemption Date or prior hereto, the Redemption Price of the
shares to their respective holders upon the surrender of their share
certificates, then from and after the date of the deposit (although prior to the
Redemption Date), the shares so called shall be redeemed. The deposit shall
constitute full payment of the shares to their holders and from and after the
date of the deposit the shares shall no longer be outstanding, and the holders
thereof shall cease to be shareholders with respect to such shares, and shall
have no rights with respect thereto except the right to notice pursuant to
paragraph (b) above and to receive from the bank or trust company payment of the
Redemption Price for the Preferred Stock which they hold, without interest, upon
the surrender of their certificates therefor and the right to convert said
shares as provided herein at any time up to but not after the close of business
on the fifth day prior to the Redemption Date of such shares (which date will
not be earlier than thirty (30) days after the written notice of redemption has
been mailed to holders of record of the Preferred Stock called for redemption).
Any monies so deposited on account of the Redemption Price of Preferred Stock
converted subsequent to the making of such deposit shall be repaid to the
Corporation forthwith upon the conversion of such Preferred Stock. Any interest
accrued on any funds so deposited shall be the property of, and paid to, the
Corporation. If the holders of Preferred Stock so called for redemption shall
not, at the end of six (6) years from the Redemption Date thereof, have claimed
any funds so deposited, such bank or trust company shall thereupon pay over to
the Corporation such unclaimed funds, and such bank or trust company shall
thereafter be relieved of all responsibility in respect thereof to such holders
and such holders shall look only to the Corporation for payment of the
Redemption Price for the Preferred Stock which they hold.
5. Voting Rights. The holder of each share of Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Preferred Stock could then be converted (with any fractional share determined on
an aggregate conversion basis being rounded to the nearest whole share), and
with respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the Bylaws of the Corporation, and
shall be entitled to vote, together with
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<PAGE> 15
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote.
6. Protective Provisions. So long as at least 900,000 shares
of Series A, Series A-1, Series B, and Series B-1 Preferred Stock (as adjusted
for stock splits, stock dividends or recapitalizations) are outstanding and have
not been converted into Common Stock, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Preferred
Stock, voting together as one class except where otherwise required by law:
(a) amend or repeal any provision of the
Corporation's Articles of Incorporation or Bylaws if such action would alter or
change the designations, preferences and relative, participating, optional and
other special rights, or the restrictions provided for the benefit of the
Preferred Stock;
(b) authorize a merger, sale of all or substantially
all the assets, consolidation, recapitalization or reorganization of the
Corporation;
(c) authorize or issue shares of any class of stock
having a preference over, or being on a parity with, the Preferred Stock with
respect to dividends or assets;
(d) pay or declare any dividend on shares of Common
Stock if current dividends on Preferred remain unpaid, except dividends solely
in Common Stock; or
(e) any repurchase or other acquisition by the
Corporation of its own shares other than pursuant to the Articles of
Incorporation or repurchases contemplated by Section 8 below.
7. Status of Converted Stock. In the event any shares of
Preferred Stock shall be converted pursuant to Section 3 hereof or redeemed
pursuant to Section 4 hereof, the shares so converted or redeemed shall be
canceled and shall not be issuable by the Corporation, and the Articles of
Incorporation of the Corporation shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized capital stock.
8. Repurchase of Shares. In connection with repurchases by the
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof providing for such repurchases in the event of the termination
of the status of such holder as an employee, director or consultant to the
Company, each holder of Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the California General Corporation Law,
to distributions made by the Corporation with respect to such repurchases.
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<PAGE> 16
(C) Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Part (B) of this Article III.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
shareholders meeting in accordance with the Bylaws of the Corporation, and shall
be entitled to vote upon such matters and in such manner as may be provided by
law.
ARTICLE IV
(A) Limitation of Directors, Liability. The liability of the directors
of the Corporation for monetary damages shall be eliminated to the fullest
extent permissible under California law.
(B) Indemnification of Corporate Agents. The Corporation is authorized
to indemnify the directors and officers of the Corporation to the fullest extent
permissible under California law.
(C) Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article IV by the shareholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification."
* * *
THREE: The foregoing amendment and restatement has been approved by the
Board of Directors of the Corporation.
FOUR: The foregoing amendment and restatement was approved by the
holders of the requisite number of shares of the Corporation in accordance with
Sections 902 and 903 of the California General Corporation Law. The total number
of outstanding shares entitled to vote with respect to the foregoing amendment
was 2,417,235 shares of Common Stock; 6,893,999 shares of Series A Preferred
Stock and 2,123,334 shares of Series B Preferred Stock. The number of shares
voting in favor of the foregoing amendment equaled or exceed the vote required,
such required vote being a majority of the outstanding shares of Common Stock, a
majority of the outstanding shares of Series A Preferred Stock and a majority of
the outstanding shares of Series B Preferred Stock, each voting separately as a
class.
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<PAGE> 17
We further declare under penalty of perjury under the laws of the State
of California that we have read the foregoing Amended and Restated Articles of
Incorporation and know the contents thereof and that the same are true of our
own knowledge.
Dated: November 27, 1996
/s/ Jeffrey W. Dunn
----------------------------------
Jeffrey W. Dunn, President
/s/ Michael W. Hall
----------------------------------
Michael W. Hall, Secretary
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<PAGE> 1
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
ACCELGRAPHICS, INC.
ARTICLE I
The name of the corporation is AccelGraphics, Inc. (the "Corporation").
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is Corporation Service Company, 1013 Centre Road, Wilmington, Delaware
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK".
The total number of shares which the Corporation is authorized to issue is
Forty-Five Million (45,000,000) shares. The number of shares of Common Stock
authorized to be issued is Twenty-Five Million (25,000,000), par value $.001 per
share, and the number of shares of Preferred Stock authorized to be issued is
Twenty Million (20,000,000), par value $.001 per share.
(B) Rights, Preferences, Privileges and Restrictions of Preferred Stock.
The Preferred Stock authorized by this Certificate of Incorporation may be
issued from time to time in series. The rights, preferences, privileges and
restrictions granted to and imposed on the Series A Preferred Stock, which
series shall consist of Six Million Nine Hundred Fifty-Four Thousand (6,954,000)
shares, the Series A-1 Preferred Stock, which series shall consist of Six
Million Nine Hundred Fifty-Four Thousand (6,954,000) shares, the Series B
Preferred Stock, which series shall consist of Two Million Two Hundred Thousand
(2,200,000) shares, and the Series B-1 Preferred Stock, which series shall
consist of Two Million Two Hundred Thousand (2,200,000) shares are as set forth
below in this Part (B) of Article IV.
Except as to the Series A, Series A-1, Series B and Series B-1
Preferred Stock and except as otherwise provided in this Certificate of
Incorporation, the Board of Directors is hereby authorized to fix or alter the
rights, preferences, privileges and
<PAGE> 2
restrictions granted to or imposed upon any wholly unissued additional series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or any of them. The Board of Directors, except as otherwise
provided in this Certificate of Incorporation, is also authorized to decrease
the number of shares of any series, subsequent to the issuance of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
1. Dividend Provisions. The holders of shares of Series A, Series
A-1, Series B, and Series B-1 Preferred Stock shall be entitled to receive
dividends, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock of
the Corporation) on the Common Stock of the Corporation, at the rate of
$0.083333333 per share for each share of Series A and Series A-1 Preferred
Stock, and $0.15 per share for each share of Series B and Series B-1 Preferred
Stock, (adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations) per annum or, if greater (as determined on an as-converted
basis), an amount equal to that paid on any other outstanding shares of the
Corporation whenever funds are legally available therefor, payable quarterly
when, as and if declared by the Board of Directors. Such dividends shall not be
cumulative.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series
A, Series A-1, Series B, and Series B-1 Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock, by reason of their ownership
thereof, an amount per share equal to $0.83333333 for each outstanding share of
Series A and Series A-1 Preferred Stock, respectively, (as adjusted for stock
splits, stock dividends and recapitalizations ) (the "ORIGINAL SERIES A AND
SERIES A-1 ISSUE PRICE"), and $1.50 for each outstanding share of Series B and
Series B-1 Preferred Stock ( as adjusted for stock splits, stock dividends and
recapitalizations) (the "ORIGINAL SERIES B AND SERIES B-1 ISSUE PRICE"), plus an
amount equal to declared but unpaid dividends thereon. If, upon the occurrence
of such an event, the assets and property thus distributed among the holders of
the Series A, Series A-1, Series B and Series B-1 Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, then the assets and property of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A,
Series A-1, Series B and Series B-1 Preferred Stock in proportion to the
aggregate preferential amounts owed such holders upon a liquidation, dissolution
or winding up of the Corporation.
(b) After the distributions described in subsections (a) above
have been paid in full, the remaining assets of the Corporation available for
distribution to
<PAGE> 3
stockholders shall be distributed among the holders of Series A, Series A-1,
Series B, and Series B-1 Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Preferred Stock).
(c) For purposes of this Section 2, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which the stockholders of the Corporation do not own a majority of the
outstanding shares of the surviving corporation or (ii) a sale of all or
substantially all of the assets of the Corporation shall be treated as a
liquidation, dissolution or winding up of the Corporation and shall entitle the
holders of Preferred Stock and Common Stock to receive at the closing cash,
securities or other property as specified in Sections 2(a) and 2(b) above;
provided that in connection with the distribution of assets contemplated by this
subsection (c) the holders of Series A and Series A-1 Preferred Stock only shall
be entitled to receive a total of $3.33333332 per share (which amount includes
the Original Series A and Series A-1 Issue Price) and the holders of Series B
and Series B-1 Preferred Stock only shall be entitled to receive a total of
$6.00 per share (which amount includes the Original Series B and Series B-1
Issue Price), and if there are any remaining proceeds such remaining proceeds
shall be distributed, among the holders of Common Stock pro rata based on the
number of shares of Common Stock held by each such stockholder.
(d) Any securities to be delivered to the holders of the
Preferred Stock and/or Common Stock pursuant to Section 2(c) above shall be
valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a national securities exchange or
the Nasdaq Stock Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the 30-day period ending
three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) days prior to the closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as determined in good faith by the Board
of Directors of the Corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i)(A), (B)
or (C) to reflect the approximate fair market value thereof, as determined in
good faith by the Board of Directors of the Corporation.
<PAGE> 4
(e) In the event the requirements of subsection 2(c) are not
complied with, the Corporation shall forthwith either:
(i) cause such closing to be postponed until such time
as the requirements of Section 2(c) have been complied with, or
(ii) cancel such transaction, in which event the rights,
preferences, privileges and restrictions of the holders of Preferred Stock shall
revert to and be the same as such rights, preferences, privileges and
restrictions existing immediately prior to the date of the first notice referred
to in Section 2(f) hereof.
(f) The Corporation shall give each holder of record of
Preferred Stock written notice of such a Section 2(c) transaction not later than
ten (10) days prior to the stockholders' meeting called to approve such
transaction, or ten (10) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction, and the Corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than ten (10) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of a majority of the Series A, Series A-1,
Series B and Series B-1 Preferred Stock then outstanding.
3. Conversion. The holders of the Series A, Series A-1, Series B and
Series B-1 Preferred Stock shall have conversion rights as follows (the
"CONVERSION RIGHTS"):
(a) Right to Convert. Each share of Series A, Series A-1,
Series Band Series B-1 Preferred Stock shall be convertible, at the option of
the holder thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for the Series A, Series A-1,
Series B, and Series B-1 Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $0.83333333
for each share of Series A and Series A-1 Preferred Stock, $1.50 for each share
of Series B and Series B-1 Preferred Stock by the Conversion Price at the time
in effect for such shares. The initial "CONVERSION PRICE" for each share of
Series A and Series A-1 Preferred Stock shall be $0.83333333 per share, for each
share of Series B and Series B-1 Preferred Stock shall be $1.50 per share;
provided, however, in either case, that such Conversion Prices shall be subject
to adjustment as set forth below.
(b) Automatic Conversion.
(i) Each share of Series A, Series A-1, Series B, and
Series B-1 Preferred Stock shall automatically be converted into shares of
Common Stock
<PAGE> 5
at the Conversion Price at the time in effect for such series of Preferred Stock
immediately upon the consummation of the Corporation's sale of its Common Stock
in a bona fide, firm commitment underwriting pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended, which
results in aggregate gross cash proceeds to the Corporation in excess of
$7,500,000 and the public offering price of which is not less than $4.67 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization).
(ii) Conversion Into Series A-1 and Series B-1
Preferred.
(A) Each share of Series A Preferred Stock held by
a Non-Participating Investor who does not purchase such holder's full Pro Rata
Share of New Securities in a Series A Dilutive Issuance, in accordance with the
procedures set forth in Section 3(b)(ii)(C) hereof, shall automatically be
converted into a share of Series A-1 Preferred Stock at a conversion rate of one
fully paid and nonassessable share of Series A-1 Preferred Stock for each share
of Series A Preferred Stock held by such holder. Each share of Series B
Preferred Stock held by a Non-Participating Investor who does not purchase such
holder's full Pro Rata Share of New Securities in a Series B Dilutive Issuance,
in accordance with the procedures set forth in Section 3(b)(ii)(C) hereof, shall
automatically be converted into a share of Series B-1 Preferred Stock at a
conversion rate of one fully paid and nonassessable share of Series B-1
Preferred Stock for each share of Series B Preferred Stock held by such holder.
(B) For purposes of this Section 3(b)(ii), the
following definitions shall apply:
(1) "NEW SECURITIES" shall mean any
Additional Stock of Common Stock, as such term is defined in Section 3(d)(ii)
below, sold in any financing transaction after the Initial Purchase Date (as
defined in Section 3(d)(i)(A) below).
(2) "PRO RATA SHARE" shall mean the ratio of
(X) the sum of the number of shares of Common Stock issuable upon the conversion
of the particular series of Preferred Stock held by a holder of such series of
Preferred Stock to (Y) the sum of the total number of shares of Common Stock
outstanding (assuming conversion of all of the outstanding shares of Preferred
Stock of the Corporation).
(3) "PARTICIPATING INVESTOR" shall mean any
holder of Series A Preferred Stock that agrees to purchase at least its Pro Rata
Share of a Series A Dilutive Issuance or a holder of Series B Preferred Stock
that agrees to purchase at least its Pro Rata share of a Series B Dilutive
Issuance, in each case pursuant to Section 3(b)(ii)(C) hereof.
<PAGE> 6
(4) "NON-PARTICIPATING INVESTOR" shall mean
any holder of Series A Preferred Stock or Series B Preferred Stock that is not a
Participating Investor.
(5) "SERIES A DILUTIVE ISSUANCE" shall mean
an issuance of New Securities for a consideration per share less than the
Conversion Price of the Series A Preferred Stock in effect on the date of and
immediately prior to such issue.
(6) "SERIES B DILUTIVE ISSUANCE" shall mean
an issuance of New Securities for a consideration per share less than the
Conversion Price of the Series B Preferred Stock in effect on the date of and
immediately prior to such issue.
(C) In the event that the Corporation shall
propose to undertake a Series A Dilutive Issuance or Series B Dilutive Issuance,
it shall give each holder of the particular series of Preferred Stock, as
appropriate, a written notice (the "PAY-TO-PLAY NOTICE") of its intention to
sell New Securities at least thirty (30) days prior to the anticipated date of
first sale of such New Securities (the "NEW SECURITIES CLOSING DATE"). The
Pay-to-Play Notice shall describe the type of New Securities, the price of such
New Securities and the general terms upon which the Corporation proposes to
issue such New Securities. Each holder of such series of Preferred Stock shall
have a right to purchase its Pro Rata Share of such New Securities (a "PURCHASE
RIGHT"), which Purchase Right shall expire fifteen (15) days prior to the New
Securities Closing Date. Each holder of such series of Preferred Stock shall be
entitled to exercise its Purchase Right by providing written notice to the
Corporation that such holder agrees to become a Participating Investor in
accordance with the terms specified in the Pay-to-Play Notice. Any holder of the
particular series of Preferred Stock (in the event of a Series A Dilutive
Issuance or Series B Dilutive Issuance, as appropriate) who fails to provide
such written notice to the Corporation prior to the expiration of such holder's
Purchase Right shall be deemed to be a Non-Participating Investor.
(D) Upon the conversion of Series A or Series B
Preferred Stock into Series A-1 or Series B-1 Preferred Stock held by a
Non-Participating Investor as set forth herein, such shares of Series A or
Series B Preferred Stock shall no longer be outstanding on the books of the
Corporation and the Non-Participating Investor shall be treated for all purposes
as the record holder of shares of Series A-1 Preferred Stock or Series B-1
Preferred Stock, as appropriate, as of the date of closing of the applicable
Series A Dilutive Issuance or Series B Dilutive Issuance.
(c) Mechanics of Conversion. Before any holder of Series A,
Series A-1, Series B, and Series B-1 Preferred Stock shall be entitled to
convert the same into shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such series of Preferred Stock, and
shall give written notice by mail, postage prepaid, to the Corporation at its
principal corporate office, of the election to convert the same and shall
<PAGE> 7
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office such holder of
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offer of securities registered pursuant to the Securities Act of
1933, as amended, the conversion will be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, unless
otherwise designated in writing by the holders of such Preferred Stock, in which
event the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) Conversion Price Adjustments of Preferred Stock.
(i) (A) If the Corporation, at any time or from time
to time after the date of the first issuance of Series A Preferred Stock (the
"SERIES A INITIAL PURCHASE DATE"), the first issuance of Series B Preferred
Stock (the "SERIES B INITIAL PURCHASE DATE"), shall issue any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for the Series A Preferred Stock or Series B Preferred
Stock in effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for the Series A and/or the Series B Preferred Stock in effect
immediately prior to each such issuance shall forthwith be adjusted to a price
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
shares of Additional Stock so issued would purchase at such Conversion Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of such shares of
Additional Stock so issued; provided that for the purposes of this subsection,
all shares of Common Stock issuable upon conversion of outstanding Preferred
Stock shall be deemed to be outstanding, and immediately after any Additional
Stock is deemed issued, such Additional Stock shall be deemed to be outstanding.
(B) No adjustment of the Conversion Price for the
Series A or Series B Preferred Stock shall be made in an amount less than one
cent per share, provided that any adjustments which are not required to be made
by reason of this sentence shall be carried forward and shall be either taken
into account in any subsequent adjustment made prior to three years from the
date of the event giving rise to the
<PAGE> 8
adjustment being carried forward, or shall be made at the end of three years
from the date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in subsections 3(d)(i)(E)(3) and
3(d)(i)(E)(4) below, no adjustment of such Conversion Price pursuant to this
subsection 3(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance, whether before,
on or after the Series A Initial Purchase Date or the Series B Initial Purchase
Date of options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable securities
(which are not excluded from the definition of Additional Stock), the following
provisions shall apply:
(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections 3(d)(i)(C) and
3(d)(i)(D) above), if any, received by the Corporation upon the issuance of such
options or rights plus the minimum purchase price provided in such options or
rights for the Common Stock covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 3(d)(i)(C) and 3(d)(i)(D) above).
<PAGE> 9
(3) In the event of any change in the number
of shares of Common Stock deliverable or any increase in the consideration
payable to the Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the antidilution
provisions thereof, the Conversion Price of the Series A or Series B Preferred
Stock obtained with respect to the adjustment which was made upon the issuance
of such options, rights or securities, and any subsequent adjustments based
thereon, shall be recomputed to reflect such change, but no further adjustment
shall be made for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the conversion
or exchange of such securities.
(4) Upon the expiration of any such options
or rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A or Series B Preferred Stock
obtained with respect to the adjustment which was made upon the issuance of such
options, rights or securities or options or rights related to such securities,
and any subsequent adjustments based thereon, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities. Upon the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, only the number
of shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities shall continue to be deemed
to be issued.
(5) All Common Stock deemed issued pursuant
to this subsection 3(d)(i)(E) shall be considered issued only at the time of its
deemed issuance and any actual issuance of such stock shall not be an actual
issuance or a deemed issuance of the Corporation's Common Stock under the
provisions of this Section 3.
(F) No adjustment of the Conversion Price for the Series A-1 or
Series B-1 Preferred Stock shall be made upon the issuance of any Additional
Stock without consideration or for consideration per share less than the
Conversion Price of the Series A-1 or Series B-1 Preferred Stock in effect
immediately prior to the issuance of such Additional Stock.
(ii) "ADDITIONAL STOCK" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(d)(i)(E))
by the Corporation on or after the Series A Initial Purchase Date or Series B
Initial Purchase Date Initial Purchase Date other than shares of Common Stock
issued or issuable
<PAGE> 10
(A) pursuant to a transaction described in
subsection 3(d)(iii) below,
(B) up to 4,000,000 shares of Common Stock (as
adjusted for stock splits, stock dividends and recapitalizations) to officers,
directors, employees and consultants of the Corporation directly or pursuant to
benefit plans approved by the stockholders and directors of the Corporation,
(C) in connection with capital equipment leases,
commercial debt financing, technology acquisitions and other comparable
transactions approved by the Board of Directors, or
(D) upon conversion of the Series A, Series A-1,
Series B or Series B-1 Preferred Stock.
(iii) In the event the Corporation should at any time or
from time to time after the Series A Initial Purchase Date or Series B Initial
Purchase Date fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Common Stock or the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "COMMON STOCK
EQUIVALENTS") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise thereof),
then, as of such record date (or the date of such dividend distribution, split
or subdivision if no record date is fixed), the Conversion Price of each series
of Series A, Series A-1, Series B and Series B-1 Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of outstanding shares determined in accordance with subsection
3(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding
at any time after the Series A Initial Purchase Date or Series B Initial
Purchase Date is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date of such combination, the Conversion Price
for each series of Series A, Series A-1, Series B and Series B-1 Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(d)(iii), then,
in each such case for the purpose of this subsection 3(e), the holders of Series
A, Series A-1, Series B and Series B-1 Preferred
<PAGE> 11
Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Series A, Series A-1, Series B and Series
B-1 Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
Section 2 or this Section 3) provision shall be made so that the holders of each
series of Series A, Series A-1, Series B and Series B-1 Preferred Stock shall
thereafter be entitled to receive upon conversion of such series of Series A,
Series A-1, Series B and Series B-1 Preferred Stock the number of shares of
stock or other securities or property of the Company or otherwise, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 3 with respect to the rights
of the holders of each series of Series A, Series A-1, Series B and Series B-1
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of such series of Series A,
Series A-1, Series B, and Series B-1 Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
(g) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of each series of Series A, Series A-1, Series
B and Series B-1 Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion
of the Preferred Stock, and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share. Whether or not fractional shares
are issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of any Conversion Price of any series of Preferred Stock pursuant
to this Section 3, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such series of Preferred Stock a certificate setting
forth such adjustment or
<PAGE> 12
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the Conversion Price at the time in effect, and (C) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of a share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock, at least 20 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Series A-1 and Series B-1
Preferred Stock solely for the purpose of effecting the conversion of the shares
of Series A and Series B Preferred Stock, respectively, such number of its
shares of Series A-1 and Series B-1 Preferred Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of Series A and
Series B Preferred Stock; and if at any time the number of authorized but
unissued shares of Series A-1 and Series B-1 Preferred Stock shall not be
sufficient to effect the conversion of all then outstanding shares of such
Series A and Series B Preferred Stock, respectively, in addition to such other
remedies as shall be available to the holder of such Series A and/or Series B
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Series A-1 and/or Series B-1 Preferred Stock to such number of shares
as shall be sufficient for such purposes.
(k) Notices. Any notice required by the provisions of this
Section 3 to be given to the holders of shares of Preferred Stock shall be
deemed given if
<PAGE> 13
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
4. Redemption Rights.
(a) Redemption. On or at any time after the sixth anniversary
of the Series A Initial Purchase Date for the Series A or Series A-1 Preferred
Stock or the Series B Initial Purchase Date for the Series B or Series B-1
Preferred Stock the Corporation may redeem all or a portion of the then
outstanding shares of each series of Preferred Stock at the Original Series A
and Series A-1 Issue Price plus declared and unpaid dividends, the Original
Series B and Series B-1 Issue Price plus declared and unpaid dividends,
respectively, (the "REDEMPTION PRICE"). In the event the Corporation determines
to redeem a portion of the outstanding shares of a particular series of
Preferred Stock, the Corporation shall effect such redemption pro rata according
to the number of shares held by each holder thereof. In addition, on or at any
time after the sixth anniversary of the Series A Initial Purchase Date for the
Series A or Series A-1 Preferred Stock or on or after the sixth anniversary of
the Series B Initial Purchase Date for the Series B or Series B-1 Preferred
Stock at the option of and upon the written request of the holders of not less
than sixty percent (60%) of the respective series of Preferred Stock then
outstanding and at such dates as such holders may so elect (the "REDEMPTION
DATE"), the Corporation shall redeem one-third of the outstanding shares of the
respective series of Preferred Stock that are requested to be redeemed (or any
lesser percentage as such holders shall elect) per year until all of such shares
of Preferred Stock that are requested to be redeemed are redeemed by paying
therefor in cash the Redemption Price. In the event that the Corporation is
unable on any Redemption Date to effect the redemption of all such series of
Preferred Stock for which redemption is so requested pursuant to this Section
4(a), the Corporation shall effect such redemption pro rata according to the
number of shares held by each requesting holder thereof. Notwithstanding the
foregoing, however, holders of each series of Preferred Stock shall be entitled
to request redemption only one time per calendar year.
(b) Notice for Company Initiated Redemption. With respect to
a redemption of Preferred Stock initiated by the Corporation, at least 30 days'
previous written notice by certified or registered mail, postage prepaid, shall
be given to the holders of record of the Preferred Stock to be redeemed, such
notice to be addressed to each such stockholder at the address of such holder
given to the Corporation for the purpose of notice, or if no such address
appears or is so given, at the place where the principal office of the
Corporation is located. Such notice shall state the Redemption Date, the
Redemption Price, the then current Conversion Rate and the date of termination
of the right to convert (which date shall not be earlier than thirty (30) days
and not later than sixty (60) days after the above written notice by mail has
been given) and shall call upon such holder to surrender to the Corporation on
said date at the place designated in the notice such holder's certificate or
certificates representing the shares to be redeemed. On or after the Redemption
Date stated in such notice, the holder of each share of Preferred Stock called
for redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to
<PAGE> 14
receive payment of the Redemption Price for the series of Preferred Stock
surrendered. If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If such notice of redemption shall have been duly given, and
if on the Redemption Date funds necessary for the redemption shall be available
therefor, then, as to any certificates evidencing any Preferred Stock so called
for redemption and not surrendered, all rights of the holders of such shares so
called for redemption and not surrendered shall cease with respect to such
shares, except only the right of the holders to receive the Redemption Price for
such series of Preferred Stock which they hold, without interest, upon surrender
of their certificates therefor.
(c) Notice for Holder Initiated Redemption.
(i) With respect to a redemption initiated by the
holders of Preferred Stock, at least 30 but no more than 60 days prior to the
Redemption Date of the Series A, Series A-1, Series B and Series B-1 Preferred
Stock, written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next preceding
the day on which notice is given) of the Series A, Series A-1, Series B, or
Series B-1 to be redeemed, at the address last shown on the records of the
Corporation for such holder or given by the holder to the Corporation for the
purpose of notice, notifying such holder of the redemption to be effected,
specifying the number of shares to be redeemed from such holder, the Redemption
Date, the Redemption Price, the place at which payment may be obtained and the
date on which such holder's Conversion Rights (as previously defined) as to such
shares terminate and calling upon such holder to surrender to the Corporation,
in the manner and at the place designated, the certificate or certificates
representing the shares to be redeemed (the "REDEMPTION NOTICE"). Except as
provided in Section (4)(c)(ii) below, on or after the Redemption Date, each
holder of Series A, Series A-1, Series B or Series B-1 Preferred Stock to be
redeemed shall surrender to the Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(ii) From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all dividends on
the Series A, Series A-1, Series B, or Series B-1 Preferred Stock designated for
redemption in the Redemption Notice shall cease to accrue, all rights of the
holders of such shares (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series A,
<PAGE> 15
Series A-1, Series B, and Series B-1 Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series A, Series A-1,
Series B or Series B-1 Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares in accordance with the provisions of Section (6)(c) hereof. The
shares of Series A, Series A-1, Series B and Series B-1 Preferred Stock not
redeemed shall remain outstanding and entitled to all the rights and preferences
provided herein. At any time thereafter when additional funds of the Company are
legally available for the redemption of shares of Series A, Series A-1, Series B
and Series B-1 Preferred Stock, such funds will immediately be used to redeem
the balance of the shares which the Company has become obligated to redeem on
any Redemption Date but which it has not redeemed.
(d) Trust Fund. On or prior to any Redemption Date, the
Corporation shall deposit, with any bank or trust company in the State of
Delaware, as a trust fund, a sum sufficient to redeem, on the Redemption Date
thereof, the shares called for redemption, with irrevocable instructions and
authority to the bank or trust company to give the notice of redemption thereof
(or to complete the giving of such notice if theretofore commenced) and to pay,
on or after the Redemption Date or prior hereto, the Redemption Price of the
shares to their respective holders upon the surrender of their share
certificates, then from and after the date of the deposit (although prior to the
Redemption Date), the shares so called shall be redeemed. The deposit shall
constitute full payment of the shares to their holders and from and after the
date of the deposit the shares shall no longer be outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares, and shall
have no rights with respect thereto except the right to notice pursuant to
paragraph (b) above and to receive from the bank or trust company payment of the
Redemption Price for the Preferred Stock which they hold, without interest, upon
the surrender of their certificates therefor and the right to convert said
shares as provided herein at any time up to but not after the close of business
on the fifth day prior to the Redemption Date of such shares (which date will
not be earlier than thirty (30) days after the written notice of redemption has
been mailed to holders of record of the Preferred Stock called for redemption).
Any monies so deposited on account of the Redemption Price of Preferred Stock
converted subsequent to the making of such deposit shall be repaid to the
Corporation forthwith upon the conversion of such Preferred Stock. Any interest
accrued on any funds so deposited shall be the property of, and paid to, the
Corporation. If the holders of Preferred Stock so called for redemption shall
not, at the end of six (6) years from the Redemption Date thereof, have claimed
any funds so deposited, such bank or trust company shall thereupon pay over to
the Corporation such unclaimed funds, and such bank or trust company shall
thereafter be relieved of all responsibility in respect thereof to such holders
and such holders shall look only to the Corporation for payment of the
Redemption Price for the Preferred Stock which they hold.
5. Voting Rights. The holder of each share of Preferred Stock shall
have the right to one vote for each share of Common Stock into which such
Preferred Stock could then be converted (with any fractional share determined on
an aggregate conversion basis being rounded to the nearest whole share), and
with respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision
<PAGE> 16
hereof, to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote.
6. Protective Provisions. So long as at least 900,000 shares of
Series A, Series A-1, Series B, and Series B-1 Preferred Stock (as adjusted for
stock splits, stock dividends or recapitalizations) are outstanding and have not
been converted into Common Stock, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Preferred
Stock, voting together as one class except where otherwise required by law:
(a) amend or repeal any provision of the Corporation's
Certificate of Incorporation or Bylaws if such action would alter or change the
designations, preferences and relative, participating, optional and other
special rights, or the restrictions provided for the benefit of the Preferred
Stock;
(b) authorize a merger, sale of all or substantially all the
assets, consolidation, recapitalization or reorganization of the Corporation;
(c) authorize or issue shares of any class of stock having a
preference over, or being on a parity with, the Preferred Stock with respect to
dividends or assets;
(d) pay or declare any dividend on shares of Common Stock if
current dividends on Preferred remain unpaid, except dividends solely in Common
Stock; or
(e) any repurchase or other acquisition by the Corporation of
its own shares [other than pursuant to the Certificate of Incorporation or
repurchases contemplated by Section 8 below.]
7. Status of Converted Stock. In the event any shares of Preferred
Stock shall be converted pursuant to Section 3 hereof or redeemed pursuant to
Section 4 hereof, the shares so converted or redeemed shall be canceled and
shall not be issuable by the Corporation, and the Certificate of Incorporation
of the Corporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized capital stock.
<PAGE> 17
(C) Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Part (B) of this Article IV.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders
meeting in accordance with the Bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
The name and mailing address of the incorporator are as follows:
Maribeth T. Younger
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
ARTICLE VI
The Board of Directors of the corporation is expressly authorized to make,
alter or repeal Bylaws of the corporation, but the stockholders may make
additional Bylaws and may alter or repeal any Bylaw whether adopted by them or
otherwise.
ARTICLE VII
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the corporation.
ARTICLE VIII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
<PAGE> 18
(B) The corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the corporation or any predecessor of the corporation, or serves or served at
any other enterprise as a director, officer or employee at the request of the
corporation or any predecessor to the corporation.
(C) Neither any amendment nor repeal of this Article VIII, nor the
adoption of any provision of this corporation's Certificate of Incorporation
inconsistent with this Article VIII, shall eliminate or reduce the effect of
this Article VIII in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VIII, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
ARTICLE IX
The corporation is to have perpetual existence.
ARTICLE X
The number of directors which will constitute the whole Board of Directors
of the corporation shall be designated in the Bylaws of the corporation.
ARTICLE XI
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors in the Bylaws of the corporation.
ARTICLE XII
"Listing Event" as used in this Certificate of Incorporation shall mean
the Corporation becoming a "Listed Corporation" within the meaning of Section
301.5 of the California Corporations Code. For the management of the business
and for the conduct of the affairs of the Corporation, and in further
definition, limitation and regulation of the powers of the Corporation, its
directors and its stockholders or any class thereof, as the case may be, it is
further provided that, effective upon the occurrence of the Listing Event:
(i) The Board of Directors of the Corporation shall divide the directors
into three classes, as nearly equal in number as reasonably possible with the
term of office of the first class to expire at the 1998 annual meeting of
stockholders or any special meeting in lieu thereof, the term of office of the
second class to expire at the 1999 annual meeting of stockholders of any special
meeting in lieu thereof and the term of office of the third class to expire at
the 2000 annual meeting of stockholders or any special meeting in lieu
<PAGE> 19
thereof and the term of office of the third class to expire at the 2000 annual
meeting of stockholders or any special meeting in lieu thereof. At each annual
meeting of stockholders of special meeting in lieu thereof following such
initial classification, directors elected to succeed those directors whose terms
expire shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders or special meeting in lieu thereof after their
election and until their successors are duly elected and qualified.
(ii) Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office of other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(a) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation and
(b) the newly created or eliminated directorships resulting from such increase
or decrease shall if reasonably possible be apportioned by the Board of
Directors among the three classes of directors so as to ensure that no one class
has more than one director more than any other class. To the extent reasonably
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation and newly eliminated directorships shall
be subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board of Directors until the vacancy is filled.
Notwithstanding the foregoing provisions of this Article XII, each director
shall serve until his or her successor is duly elected and qualified or until
his or her death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(iii) There shall be no right with respect to shares of stock of the
corporation to cumulate votes in election of directors.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 20
IN WITNESS WHEREOF, the undersigned has executed this certificate on
January 28, 1997.
/s/ Maribeth T. Younger
----------------------------------
Maribeth T. Younger, Incorporator
<PAGE> 1
Exhibit 3.6
BYLAWS
OF
ACCELGRAPHICS, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I - CORPORATE OFFICES..................................................1
1.1 Principal Office...................................................1
1.2 Other Offices......................................................1
ARTICLE II - MEETINGS OF SHAREHOLDERS..........................................1
2.1 Place of Meetings..................................................1
2.2 Annual Meeting.....................................................1
2.3 Special Meeting....................................................2
2.4 Notice of Shareholders' Meetings...................................2
2.5 Manner of Giving Notice; Affidavit of Notice.......................3
2.6 Quorum.............................................................3
2.7 Adjourned Meeting; Notice..........................................3
2.8 Voting.............................................................4
2.9 Validation of Meetings; Waiver of Notice; Consent..................5
2.10 Shareholder Action by Written Consent without a Meeting............5
2.11 Record Date for Shareholder Notice; Voting; Giving Consents........6
2.12 Proxies............................................................7
2.13 Inspectors of Election.............................................7
ARTICLE III - DIRECTORS........................................................8
3.1 Powers.............................................................8
3.2 Number of Directors................................................8
3.3 Election and Term of Office of Directors...........................9
3.4 Resignation and Vacancies..........................................9
3.5 Place of Meetings; Meetings by Telephone...........................9
3.6 Regular Meetings..................................................10
3.7 Special Meetings; Notice..........................................10
3.8 Quorum............................................................10
3.9 Waiver of Notice..................................................11
3.10 Adjournment.......................................................11
3.11 Notice of Adjournment.............................................11
3.12 Board Action by Written Consent Without a Meeting.................11
3.13 Fees and Compensation of Directors................................11
3.14 Approval of Loans to Officers.....................................11
-1-
<PAGE> 3
Page
----
ARTICLE IV - COMMITTEES.......................................................12
4.1 Committees of Directors...........................................12
4.2 Meetings and Action of Committees.................................12
ARTICLE V - OFFICERS..........................................................13
5.1 Officers..........................................................13
5.2 Election of Officers..............................................13
5.3 Subordinate Officers..............................................13
5.4 Removal and Resignation of Officers...............................14
5.5 Vacancies in Offices..............................................14
5.6 Chairman of the Board.............................................14
5.7 President.........................................................14
5.8 Vice Presidents...................................................15
5.9 Secretary.........................................................15
5.10 Chief Financial Officer...........................................15
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND
OTHER AGENTS..................................................................16
6.1 Indemnification of Directors and Officers.........................16
6.2 Indemnification of Others.........................................16
6.3 Payment of Expenses in Advance....................................16
6.4 Indemnity Not Exclusive...........................................17
6.5 Insurance Indemnification.........................................17
6.6 Conflicts.........................................................17
ARTICLE VII - RECORDS AND REPORTS.............................................17
7.1 Maintenance and Inspection of Share Register......................17
7.2 Maintenance and Inspection of Bylaws..............................18
7.3 Maintenance and Inspection of Other Corporate Records.............18
7.4 Inspection by Directors...........................................19
7.5 Annual Report to Shareholders; Waiver.............................19
7.6 Financial Statements..............................................19
7.7 Representation of Shares of Other Corporations....................20
ARTICLE VIII - GENERAL MATTERS................................................20
8.1 Record Date for Purposes Other Than Notice and Voting.............20
8.2 Checks; Drafts; Evidences of Indebtedness.........................21
8.3 Corporate Contracts and Instruments How Executed..................21
8.4 Certificates for Shares...........................................21
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Page
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8.5 Lost Certificates.................................................21
8.6 Construction; Definitions.........................................22
ARTICLE IX AMENDMENTS.........................................................22
9.1 Amendment by Shareholders.........................................22
9.2 Amendment by Directors............................................22
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BYLAWS
OF
ACCELGRAPHICS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 Principal Office
The Board of Directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the Board
of Directors shall fix and designate a principal business office in the State of
California.
1.2 Other Offices
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Place of Meetings
Meetings of shareholders shall be held at any place within or outside the
State of California designated by the Board of Directors. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 Annual Meeting
The annual meeting of shareholders shall be held each year on a date and
at a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the first
Monday of April in each year at 10:00AM or on any other date and time as the
Board of Directors shall set. However, if such day falls on a legal holiday,
then the meeting shall be held at the same time and place on the next succeeding
full business day. At the meeting, directors shall be elected, and any other
proper business may be transacted.
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2.3 Special Meeting
A special meeting of the shareholders may be called at any time by the
Board of Directors, or by the Chairman of the Board, or by the President, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors or the President or the Chairman of the Board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board, the President, any Vice President or
the Secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the Board of Directors may be held.
2.4 Notice of Shareholders' Meetings
All notices of meetings of shareholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if
sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30))
nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the Board of Directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the Articles of Incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
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2.5 Manner of Giving Notice; Affidavit of Notice
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the Secretary, Assistant Secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 Quorum
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 Adjourned Meeting; Notice
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the absence
of a quorum, no other business may be transacted at that meeting except as
provided in Section 2.6 of these bylaws.
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When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.8 Voting
The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or a vote by classes is
required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit. The
candidates receiving the
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highest number of affirmative votes, up to the number of directors to be
elected, shall be elected; votes against any candidate and votes withheld shall
have no legal effect.
2.9 Validation of Meetings; Waiver of Notice; Consent
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 Shareholder Action by Written Consent without a Meeting
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the Board of Directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the Secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
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If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the Secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
2.11 Record Date for Shareholder Notice; Voting; Giving Consents
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the Board of Directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in
Article VIII of these bylaws.
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2.12 Proxies
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the Secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the shareholder or the shareholder's attorney-in-fact. A
validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) the person who executed the proxy
revokes it prior to the time of voting by delivering a writing to the
corporation stating that the proxy is revoked or by executing a subsequent proxy
and presenting it to the meeting or by voting in person at the meeting, or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy, unless otherwise provided in the proxy. The dates
contained on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Sections 705(e) and 705(f) of the Code.
2.13 Inspectors of Election
Before any meeting of shareholders, the Board of Directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment. If
no inspector of election is so appointed, then the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall, appoint an
inspector or inspectors of election to act at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed at
a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
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(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 Powers
Subject to the provisions of the Code and any limitations in the Articles
of Incorporation and these bylaws relating to action required to be approved by
the shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors.
3.2 Number of Directors
The number of directors of the corporation shall be one (1) as long as
there is only one holder of outstanding shares of capital stock of the
corporation, two (2) so long as there are not more than two (2) holders of
outstanding shares of capital stock of the corporation. As soon as the number of
holders of outstanding shares of stock in the corporation exceeds two (2) the
following provisions shall apply with respect to the number of directors:
The number of directors of the corporation shall be not less than three
(3) nor more than five (5). The exact number of directors will be initially set
at three (3), but may be altered by action of the Board of Directors within the
limits specified herein, amending this Section 3.2, duly adopted by the Board of
Directors or, similarly, by the shareholders. The indefinite number of directors
may be changed, or a definite number may be fixed without provision for an
indefinite number, by a duly adopted amendment to the Articles of Incorporation
or by an amendment to this bylaw duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number of the minimum number of
directors to a number less than five cannot be adopted if the votes cast against
its adoption at a meeting, or the shares not consenting in the case of an action
by written consent, are equal to more than sixteen and two-thirds percent
(16-2/3%) of the outstanding shares entitled to vote thereon. No amendment may
change the stated maximum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one (1).
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
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3.3 Election and Term of Office of Directors
Directors shall be elected at each annual meeting of shareholders to hold
office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 Resignation and Vacancies
Any director may resign effective on giving written notice to the Chairman
of the Board, the President, the Secretary or the Board of Directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes effective.
Vacancies in the Board of Directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
(i) in the event of the death, resignation or removal of any director, (ii) if
the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election other
than to fill a vacancy created by removal, if by written consent, shall require
the consent of the holders of a majority of the outstanding shares entitled to
vote thereon.
3.5 Place of Meetings; Meetings by Telephone
Regular meetings of the Board of Directors may be held at any place within
or outside the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
California that has been designated in the notice of the meeting or, if not
stated in the notice or if there is no notice, at the principal executive office
of the corporation.
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Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 Regular Meetings
Regular meetings of the Board of Directors may be held without notice if
the times of such meetings are fixed by the Board of Directors.
3.7 Special Meetings; Notice
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the Chairman of the Board, the President, any Vice
President, the Secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 Quorum
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
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3.9 Waiver of Notice
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
3.10 Adjournment
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 Notice of Adjournment
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 Board Action by Written Consent Without a Meeting
Any action required or permitted to be taken by the Board of Directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the Board of
Directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the Board.
3.13 Fees and Compensation of Directors
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 Approval of Loans to Officers
The corporation may, upon the approval of the Board of Directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the Board of Directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has
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outstanding shares held of record by 100 or more persons (determined as provided
in Section 605 of the Code) on the date of approval by the Board of Directors,
and (iii) the approval of the Board of Directors is by a vote sufficient without
counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1 Committees of Directors
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the Board. The
Board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the Board, shall have all the authority of
the Board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
Board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the Board
of Directors; or
(g) the appointment of any other committees of the Board of
Directors or the members of such committees.
4.2 Meetings and Action of Committees
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings),
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Section 3.6 (regular meetings), Section 3.7 (special meetings and notice),
Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10
(adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 Officers
The officers of the corporation shall be a President, a Secretary, and a
Chief Financial Officer. The corporation may also have, at the discretion of the
Board of Directors, a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 Election of Officers
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the Board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 Subordinate Officers
The Board of Directors may appoint, or may empower the President to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the Board of Directors may
from time to time determine.
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5.4 Removal and Resignation of Officers
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
Board of Directors at any regular or special meeting of the Board or, except in
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Offices
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 Chairman of the Board
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws. If there is no
President, then the Chairman of the Board shall also be the Chief Executive
Officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 President
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the Chairman of the Board, if there be such an officer, the
President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a Chairman of the Board, at all meetings of the Board of
Directors. He shall have the general powers and duties of management usually
vested in the office of President of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
bylaws.
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5.8 Vice Presidents
In the absence or disability of the President, the Vice Presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a Vice President designated by the Board of Directors, shall perform all
the duties of the President and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these bylaws,
the President or the Chairman of the Board.
5.9 Secretary
The Secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these Bylaws.
5.10 Chief Financial Officer
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of his
transactions as Chief Financial Officer and of the financial condition of the
corporation, and
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shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 Indemnification of Directors and Officers
The corporation shall, to the maximum extent and in the manner permitted
by the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 Indemnification of Others
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 Payment of Expenses in Advance
Expenses incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be
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determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 Indemnity Not Exclusive
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 Insurance Indemnification
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation against any liability asserted against or incurred by such person in
such capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
6.6 Conflicts
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(1) That it would be inconsistent with a provision of the Articles
of Incorporation, these bylaws, a resolution of the shareholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 Maintenance and Inspection of Share Register
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the Board of Directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
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A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 Maintenance and Inspection of Bylaws
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the Secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 Maintenance and Inspection of Other Corporate Records
The accounting books and records and the minutes of proceedings of the
shareholders, of the Board of Directors, and of any committee or committees of
the Board of Directors shall be kept at such place or places as are designated
by the Board of Directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a
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shareholder or as the holder of a voting trust certificate. The inspection may
be made in person or by an agent or attorney and shall include the right to copy
and make extracts. Such rights of inspection shall extend to the records of each
subsidiary corporation of the corporation.
7.4 Inspection by Directors
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 Annual Report to Shareholders; Waiver
The Board of Directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 Financial Statements
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the Chief
Financial Officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the
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<PAGE> 24
receipt of the request. If the corporation has not sent to the shareholders its
annual report for the last fiscal year, the statements referred to in the first
paragraph of this Section 7.6 shall likewise be delivered or mailed to the
shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 Representation of Shares of Other Corporations
The Chairman of the Board, the President, any vice president, the Chief
Financial Officer, the Secretary or Assistant Secretary of this corporation, or
any other person authorized by the Board of Directors or the President or a Vice
President, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 Record Date for Purposes Other Than Notice and Voting
For purposes of determining the shareholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the Board of Directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the Board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
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8.2 Checks; Drafts; Evidences of Indebtedness
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 Corporate Contracts and Instruments: How Executed
The Board of Directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 Certificates for Shares
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The Board of
Directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the Chairman of the Board or
the Vice Chairman of the Board or the President or a Vice President and by the
Chief Financial Officer or an assistant treasurer or the Secretary or an
Assistant Secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 Lost Certificates
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The Board of
Directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the Board may require; the Board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
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8.6 Construction; Definitions
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 Amendment by Shareholders
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 Amendment by Directors
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the Board of Directors.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
ACCELGRAPHICS, INC.
Adoption by Incorporator
The undersigned person appointed in the Articles of Incorporation to act
as the Incorporator of AccelGraphics, Inc. hereby adopts the foregoing bylaws,
comprising twenty-two (22) pages, as the Bylaws of the corporation.
Executed this 9th day of November, 1994.`
/s/ Edmund S. Ruffin, Jr.
-------------------------------------
Edmund S. Ruffin, Jr., Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of AccelGraphics, Inc., and that the foregoing Bylaws,
comprising twenty-two (22) pages, were adopted as the Bylaws of the corporation
on April 4, 1994, by the person appointed in the articles of incorporation to
act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and affixed
the corporate seal this 9th day of November, 1994.
/s/ Michael W. Hall
-------------------------------------
Michael W. Hall, Secretary
<PAGE> 1
EXHIBIT 3.7
BYLAWS
OF
ACCELGRAPHICS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - CORPORATE OFFICES......................................................1
1.1 Registered Office....................................................1
1.2 Other Offices........................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS..............................................1
2.1 Place Of Meetings....................................................1
2.2 Annual Meeting.......................................................1
2.3 Special Meeting......................................................1
2.4 Notice Of Stockholders' Meetings.....................................1
2.5 Advance Notice Of Stockholder Nominees...............................2
2.6 Advance Notice Of Stockholder Business...............................2
2.7 Manner Of Giving Notice; Affidavit Of Notice.........................3
2.8 Quorum...............................................................3
2.9 Adjourned Meeting; Notice............................................3
2.10 Conduct Of Business..................................................4
2.11 Voting...............................................................4
2.12 Stockholder Action By Written Consent Without A Meeting..............4
2.13 Waiver Of Notice.....................................................4
2.14 Record Date For Stockholder Notice; Voting...........................4
2.15 Proxies..............................................................5
ARTICLE III - DIRECTOR.............................................................5
3.1 Powers...............................................................5
3.2 Number Of Directors..................................................5
3.3 Election, Qualification And Term Of Office Of Directors..............6
3.4 Resignation And Vacancies............................................6
3.5 Place Of Meetings; Meetings By Telephone.............................6
3.6 Regular Meetings.....................................................7
3.7 Special Meetings; Notice.............................................7
3.8 Quorum...............................................................7
3.9 Waiver Of Notice.....................................................8
3.10 Board Action By Written Consent Without A Meeting....................8
3.11 Fees And Compensation Of Directors...................................8
3.12 Approval Of Loans To Officers........................................8
3.13 Removal Of Directors.................................................8
3.14 Chairman Of The Board Of Directors...................................9
ARTICLE IV - COMMITTEES............................................................9
4.1 .Committees Of Directors..............................................9
4.2 Committee Minutes....................................................10
4.3 Meetings And Action Of Committees....................................10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V - OFFICERS...............................................................10
5.1 Officers.............................................................10
5.2 Appointment Of Officers..............................................10
5.3 Subordinate Officers.................................................10
5.4 Removal And Resignation Of Officers................................. 11
5.5 Vacancies In Offices................................................ 11
5.6 Chief Executive Officer..............................................11
5.7 President............................................................11
5.8 Vice Presidents......................................................11
5.9 Secretary............................................................12
5.10 Chief Financial Officer..............................................12
5.11 Representation Of Shares Of Other Corporations.......................12
5.12 Authority And Duties Of Officers.....................................13
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS...................................................................13
6.1 Indemnification Of Directors And Officers............................13
6.2 Indemnification Of Others............................................13
6.3 Payment Of Expenses In Advance.......................................14
6.4 Indemnity Not Exclusive..............................................14
6.5 Insurance............................................................14
6.6 Conflicts............................................................14
ARTICLE VII - RECORDS AND REPORTS..................................................15
7.1 Maintenance And Inspection Of Records................................15
7.2 Inspection By Directors..............................................15
7.3 Annual Statement To Stockholders.....................................15
ARTICLE VIII - GENERAL MATTERS.....................................................15
8.1 Checks...............................................................15
8.2 Execution Of Corporate Contracts And Instruments.....................16
8.3 Stock Certificates; Partly Paid Shares...............................16
8.4 Special Designation On Certificates..................................16
8.5 Lost Certificates....................................................17
8.6 Construction; Definitions............................................17
8.7 Dividends............................................................17
8.8 Fiscal Year..........................................................17
8.9 Seal.................................................................18
8.10 Transfer Of Stock....................................................18
8.11 Stock Transfer Agreements............................................18
8.12 Registered Stockholders..............................................18
ARTICLE IX - AMENDMENTS............................................................18
</TABLE>
<PAGE> 4
FORM OF
BYLAWS
OF
ACCELGRAPHICS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The registered office of the corporation shall be in the City
of Wilmington, County of New Castle, State of Delaware. The name of the
registered agent of the corporation at such location is the Corporation Service
Company.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices
at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 ANNUAL MEETING.
The annual meeting of stockholders shall be held, on any date,
time and place, either within or without the State of Delaware, as may be
designated by the Board of Directors. At the meeting, directors shall be elected
and any other proper business may be transacted.
2.3 SPECIAL MEETING.
A special meeting of the stockholders may be called at any
time by the Board of Directors, or by the chairman of the board, or by one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten percent (10%) of the votes at that meeting.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.
<PAGE> 5
All notices of meetings with stockholders shall be in writing
and shall be sent or otherwise given in accordance with Section 2.5 of these
Bylaws not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. The notice
shall specify the place, date, and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES.
Only persons who are nominated in accordance with the
procedures set forth in this Section 2.5 shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 2.5. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than sixty (60) days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or re-election as a Director, (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including, without limitation, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of such stockholder, (ii)
the class and number of shares of the corporation which are beneficially owned
by such stockholder and (iii) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) relating to the nomination. At the
request of the Board of Directors any person nominated by the Board of Directors
for election as a director shall furnish to the secretary of the corporation
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 2.5. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if he
or she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
2.6 ADVANCE NOTICE OF STOCKHOLDER BUSINESS.
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At any meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before a meeting, business must be: (a) as specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. Business to be brought before a meeting by
a stockholder shall not be considered properly brought if the stockholder has
not given timely notice thereof in writing to the secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than twenty (20)
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event less than thirty (30) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. A stockholder's notice to
the secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and address of the stockholder proposing such business,
(iii) the class and number of shares of the corporation, which are beneficially
owned by the stockholder, (iv) any material interest of the stockholder in such
business, and (v) any other information that is required by law to be provided
by the stockholder in his capacity as a proponent of a stockholder proposal.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at any meeting except in accordance with the procedures set forth in
this Section 2.6. The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section , and, if
he should so determine, he shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
2.7 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Written notice of any meeting of stockholders, if mailed, is
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.8 QUORUM.
The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
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represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.9 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless
these Bylaws otherwise require, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.10 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including the manner of
voting and the conduct of business.
2.11 VOTING.
The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.14 of these Bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.12 NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action required to be taken at an annual or special
meeting of stockholders of the corporation, or any action that may be taken at
an annual or special meeting of such stockholders, must be taken at an annual or
special meeting of stockholders of the corporation, with prior notice and with a
vote, and may not be taken by a consent in writing.
2.13 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the certificate of incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
Bylaws.
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2.14 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to any
other action.
If the Board of Directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
2.15 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for such stockholder by a
written proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212 of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the certificate of incorporation or these Bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the
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corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors.
3.2 NUMBER OF DIRECTORS.
The Board of Directors shall consist of seven persons until
changed by a proper amendment of this Section 3.2.
No reduction of the authorized number of directors shall have
the effect of removing any director before such director's term of office
expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
(a) The board of directors shall be divided into three classes, as
nearly equal in number as possible. The term of office of the first class shall
expire at the 1998 annual meeting of stockholders or any special meeting in lieu
thereof, the term of office of the second class shall expire at the 1999 annual
meeting of stockholders or any special meeting in lieu thereof and the term of
office of the third class shall expire at the 2000 annual meeting of
stockholders or any special meeting in lieu thereof. At each annual meeting of
stockholders or special meeting in lieu thereof following such initial
classification, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders or special meeting in lieu thereof after their election
and until their successors are duly elected and qualified.
(b) Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall if reasonably possible be apportioned by the Board of
Directors among the three classes of directors so as to ensure that no one class
has more than one director more than any other class. To the extent reasonably
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation and newly eliminated directorships shall
be subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board of Directors until the vacancy is filled.
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(c) The foregoing provisions shall become effective only when the
corporation becomes a listed corporation within the meaning of Section 301.5 of
the California Corporations Code.
(d) Elections of directors need not be by written ballot.
3.4 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the corporation may hold meetings,
both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of
incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
3.5 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
3.6 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.7 QUORUM.
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
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incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.8 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the certificate of incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these Bylaws.
3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the board or committee. Written consents representing
actions taken by the board or committee may be executed by telex, telecopy or
other facsimile transmission, and such facsimile shall be valid and binding to
the same extent as if it were an original.
3.10 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of
incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. No such compensation shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
3.11 APPROVAL OF LOANS TO OFFICERS.
The corporation may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the corporation or of
its subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall
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be deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
3.12 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of such director's
term of office.
3.13 CHAIRMAN OF THE BOARD OF DIRECTORS.
The corporation may also have, at the discretion of the Board
of Directors, a chairman of the Board of Directors who shall not be considered
an officer of the corporation.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, with each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors or in the Bylaws of the
corporation, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix the designations
and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any
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series), (ii) adopt an agreement of merger or consolidation under Sections 251
or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
the Bylaws of the corporation; and, unless the board resolution establishing the
committee, the Bylaws or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and
held and taken in accordance with, the provisions of Section 3.4 (place of
meetings and meetings by telephone), Section 3.5 (regular meetings), Section 3.6
(special meetings and notice), Section 3.7 (quorum), Section 3.8 (waiver of
notice), and Section 3.9 (action without a meeting) of these Bylaws, with such
changes in the context of such provisions as are necessary to substitute the
committee and its members for the Board of Directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the Board of Directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the Board of Directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS.
The officers of the corporation shall be a chief executive
officer, a president, a secretary, and a chief financial officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and any such other officers as may be appointed in accordance with
the provisions of Section 5.3 of these Bylaws. Any number of offices may be held
by the same person.
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5.2 APPOINTMENT OF OFFICERS.
The officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief
executive officer or the president to appoint, such other officers and agents as
the business of the corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any
contract of employment, any officer may be removed, either with or without
cause, by an affirmative vote of the majority of the Board of Directors at any
regular or special meeting of the board or, except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such power of removal
may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to
the attention of the secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the corporation shall
be filled by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these bylaws.
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5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board (if any) or the chief
executive officer, the president shall have general supervision, direction, and
control of the business and other officers of the corporation. He or she shall
have the general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer
and president, the vice presidents, if any, in order of their rank as fixed by
the Board of Directors or, if not ranked, a vice president designated by the
Board of Directors, shall perform all the duties of the president and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors, these Bylaws, the president or the
chairman of the board.
5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the
principal executive office of the corporation or at the office of the
corporation's transfer agent or registrar, as determined by resolution of the
Board of Directors, a share register, or a duplicate share register, showing the
names of all stockholders and their addresses, the number and classes of shares
held by each, the number and date of certificates evidencing such shares, and
the number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements,
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gains, losses, capital retained earnings, and shares. The books of account shall
at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by the person
having such authority.
5.12 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all
officers of the corporation shall respectively have such authority and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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6.2 INDEMNIFICATION OF OTHERS.
The corporation shall have the power, to the maximum extent
and in the manner permitted by the General Corporation Law of Delaware, to
indemnify each of its employees and agents (other than directors and officers)
against expenses (including attorneys' fees), judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) includes any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for
which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 INSURANCE.
The corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article
VI, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
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(a) That it would be inconsistent with a provision of the
certificate of incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The corporation shall, either at its principal executive
offices or at such place or places as designated by the Board of Directors, keep
a record of its stockholders listing their names and addresses and the number
and class of shares held by each stockholder, a copy of these Bylaws as amended
to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to so
act on behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the corporation's
stock ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
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ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these
Bylaws, may authorize any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of a corporation shall be represented by
certificates, provided that the Board of Directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by
the chairman or vice-chairman of the Board of Directors, or the chief executive
officer or the president or vice-president, and by the chief financial officer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares
as partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon
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<PAGE> 20
partly paid shares of the same class, but only upon the basis of the percentage
of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class
of stock or more than one series of any class, then the powers, the
designations, the preferences, and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
that the corporation shall issue to represent such class or series of stock;
provided, however, that, except as otherwise provided in Section 202 of the
General Corporation Law of Delaware, in lieu of the foregoing requirements there
may be set forth on the face or back of the certificate that the corporation
shall issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.5 LOST CERTIFICATES.
Except as provided in this Section 8.5, no new certificates
for shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Delaware General Corporation Law
shall govern the construction of these Bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS.
The directors of the corporation, subject to any restrictions
contained in (i) the General Corporation Law of Delaware or (ii) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of
the funds of the corporation available for dividends a reserve or reserves for
any proper purpose and may abolish
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any such reserve. Such purposes shall include but not be limited to equalizing
dividends, repairing or maintaining any property of the corporation, and meeting
contingencies.
8.8 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors and may be changed by the Board of
Directors.
8.9 SEAL.
The corporation may adopt a corporate seal, which may be
altered at pleasure, and may use the same by causing it or a facsimile thereof,
to be impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, shall be entitled to hold liable for calls
and assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
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<PAGE> 22
CERTIFICATE BY SECRETARY OF AMENDED AND RESTATED BYLAWS
The undersigned hereby certifies that the undersigned is the duly
elected, qualified, and acting secretary OF AccelGraphics, Inc., and that the
foregoing Amended and Restated Bylaws were adopted on February __, 1997.
Executed this _____ day of February 1997.
-------------------------------------
Edmund S. Ruffin, Jr., Secretary
<PAGE> 1
EXHIBIT 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
Issued: December 29, 1995 CS-1
ACCELGRAPHICS, INC.
WARRANT TO PURCHASE
35,000 SHARES OF
COMMON STOCK
1. Number and Price of Shares Subject to Warrant.
(a) Warrant Purchase Agreement. This Common Stock Warrant is
executed and delivered by AccelGraphics, Inc., a California corporation (the
"COMPANY") pursuant to that certain Warrant Purchase Agreement dated as of
December 29, 1995 (the "AGREEMENT"), executed and delivered by the Company and
Intel Corporation (the "PURCHASER"). All provisions of the Agreement applicable
hereto are incorporated herein by reference.
(b) Term. Subject to the terms and conditions herein set
forth, at Purchaser's option, the Purchaser is entitled to purchase from the
Company at any time after the date of this Warrant and on or before the earlier
of (i) December 29, 1998, or (ii) the closing of a transaction or series of
transactions involving the Company's sale of all or substantially all of its
assets or the acquisition of the Company by another entity by means of merger or
other transaction as a result of which shareholders of the Company immediately
prior to such acquisition possess a minority of the voting power of the
surviving entity immediately following such acquisition (a "MERGER"), or (iii)
the closing of the initial public offering of the Company's Common Stock
registered under the Securities Act of 1933, as amended (the "1933 ACT"), up to
35,000 shares (which number of shares is subject to adjustment as described
below) of fully paid and nonassessable Common Stock of the Company.
(c) Warrant Price. Subject to adjustment as hereinafter
provided, the purchase price of one share of Common Stock shall be equal to
$2.25 per share. The purchase price of one share of Common Stock (or such
securities as may be substituted for one share of Common Stock pursuant to the
provisions hereinafter set forth) payable from time to time upon the exercise of
this Warrant (whether such price be the price specified above or an adjusted
price determined as hereinafter provided) is referred to herein as the "WARRANT
PRICE."
<PAGE> 2
2. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities issuable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the happening of certain events as follows:
(a) Adjustment for Dividends in Stock or Other Securities or
Property. In case at any time or from time to time on or after the date hereof
the holders of the Common Stock of the Company (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have
received, or, on or after the record date fixed for the determination of
eligible shareholders, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities or property (other than
cash) of the Company by way of dividend, then and in each case, the holder of
this Warrant shall, upon the exercise hereof, be entitled to receive, in
addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of such
other or additional stock or other securities or property (other than cash) of
the Company which such holder would hold on the date of such exercise had it
been the holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period, giving effect to all adjustments called
for during such period by paragraphs (b) and (c) of this Section 2.
(b) Adjustment for Reclassification, Reorganization or Merger.
In case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other corporation the
stock or securities of which are at the time receivable upon the exercise of
this Warrant) or any similar corporate reorganization on or after the date
hereof, then and in each such case the holder of this Warrant, upon the exercise
hereof at any time after the consummation of such reclassification, change,
reorganization, merger or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise hereof
prior to such consummation, the stock or other securities or property to which
such holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in paragraphs (a) and (c) of this Section 2; and in each
such case, the terms of this Section 2 shall be applicable to the shares of
stock or other securities properly receivable upon the exercise of this Warrant
after such consummation.
(c) Stock Splits and Reverse Stock Splits. If at any time on
or after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of the Warrant shall thereby
be proportionately increased; and, conversely, if at any time on or after the
date hereof the outstanding number of shares of Common Stock shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall thereby be proportionately increased and the number of
shares receivable upon exercise of this Warrant shall thereby be proportionately
decreased.
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<PAGE> 3
3. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the Fair Market Value (as defined
below) of one share of Common Stock on the date of exercise.
4. No Shareholder Rights. This Warrant represents only the right to
purchase shares of Common Stock of the Company and shall not otherwise entitle
its holder to any of the rights of a shareholder of the Company unless and until
it is exercised in accordance with the terms hereof.
5. Exercise of Warrant.
(a) Method of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, by the surrender of
this Warrant at the principal office of the Company, accompanied by the
completed and executed Notice of Exercise (attached hereto as Exhibit A) and
payment of the Warrant Price. The Warrant Price may be paid (i) by check, of an
amount equal to the then applicable Warrant Price per share multiplied by the
number of shares of Common Stock then being purchased, (ii) by cancellation of
any present or future indebtedness from the Company to the holder hereof in an
amount equal to the then applicable Warrant Price per share multiplied by the
number of shares of Common Stock then being purchased, or (iii) pursuant to the
net exercise provisions set forth in Section 5(b) below. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and the person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. As promptly as practicable on or after such date and in
any event within five (5) business days thereafter, the Company at its expense
shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided above, and, unless this Warrant has been fully exercised or
has expired, a new Warrant representing the portion of the shares of Common
Stock, if any, with respect to which this Warrant shall not have been exercised,
shall also be issued to the holder hereof.
(b) Net Issue Exercise.
(i) In lieu of exercising this Warrant in the manner
provided above in Section 5(a), the holder hereof may elect to receive shares
equal to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
the Notice of Exercise (attached hereto as Exhibit A) in which event the Company
shall issue to holder a number of shares of the Company's Common Stock computed
using the following formula:
X = Y (A - B)
---------
A
Where: X = The number of shares of Common Stock to be issued to holder.
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<PAGE> 4
Y = The number of shares of Common Stock purchasable
under this Warrant (at the date of such calculation).
A = The Fair Market Value (as defined below) of one
share of the Company's Common Stock (at the date of
such calculation).
B = The Warrant Price (as adjusted to the date of
such calculation).
(ii) For purposes of this Section 5(b), the term
"FAIR MARKET VALUE" means the value of the Company's Common Stock on the
pertinent date, determined as follows:
(a) If the Common Stock of the Company is
traded on a stock exchange on such date, then the Fair Market Value will be
equal to the average of the closing price reported by the applicable
composite-transactions report for the 20 trading days prior to such date;
(b) If the Common Stock of the Company is
traded on the Nasdaq National Market, then the Fair Market Value will be equal
to the average of the last-transaction price quoted by the Nasdaq National
Market for the 20 trading days prior to such date;
(c) If the exercise of this Warrant is to be
effective as of the closing of the Company's initial public offering of its
Common Stock pursuant to a registration statement filed pursuant to the 1933
Act, then the Fair Market Value will be equal to the "price to public" specified
for such stock in the final prospectus for such public offering;
(d) If the exercise of this Warrant is to be
effective as of the closing of a Merger, then the Fair Market Value will be an
amount consistent with the value of the Common Stock implied by such transaction
or transactions; and
(e) If none of the foregoing provisions is
applicable, then the Fair Market Value will be determined by the Board of
Directors of the Company in good faith on such basis as it deems appropriate.
6. Certificate of Adjustment. Whenever the Warrant Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
7. Transfer of Warrant. This Warrant may not be transferred by the
Purchaser without the written consent of the Company.
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<PAGE> 5
8. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Purchaser shall have the registration
rights contained in the Amended and Restated Rights Agreement dated June 20,
1995 between the Company and certain shareholders of the Company, as set forth
on Exhibit A thereto.
10. Miscellaneous. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. This Warrant may be changed, waived, discharged or terminated only by an
instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be mailed by first class registered or certified mail, postage
prepaid, to the address furnished to the Company in writing by the last holder
of this Warrant who shall have furnished an address to the Company in writing.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provisions.
11. Attorney's Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Warrant, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
12. Notice. The Company shall give Purchaser written notice of any
sale, merger, consolidation or public offering referred to in Section 1(b) or
any cash dividend declared on the Company's Common Stock at least twenty (20)
days prior to the closing of any such sale, merger, consolidation or public
offering or the record date fixed for the determination of shareholders eligible
for such dividend and shall deliver a copy of the preliminary prospectus with
respect to any such public offering to Purchaser promptly after it becomes
available.
This Common Stock Warrant is issued as of the 29th day of December,
1995.
ACCELGRAPHICS, INC.
By: /s/ Nancy E. Bush
______________________________
Nancy E. Bush, Chief Financial
Officer and Vice President,
Operations
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<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE
To: Secretary of AccelGraphics, Inc.
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___) hereby irrevocably elects to purchase ________ shares of the
Common Stock of AccelGraphics, Inc. covered by such Warrant. The undersigned
herewith makes payment of $____________, representing the full purchase price
for such shares at the price per share provided for in such Warrant. Such
payment takes the form of (check applicable box or boxes):
\ \ a check for $_______ in lawful money of the United States;
\ \ cancellation of $________ of indebtedness from the Company to
the undersigned; or
\ \ the cancellation of such portion of the attached Warrant as is
exercisable for a total of ________ Warrant Shares (using a
Fair Market Value of $_________ per share for purposes of this
calculation).
Date:_________________ Signature:_____________
Address:_____________
_____________
_____________
<PAGE> 1
EXHIBIT 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
CORPORATION: ACCELGRAPHICS, INC., A CALIFORNIA CORPORATION
NUMBER OF SHARES: 40,000
CLASS OF STOCK: SERIES A PREFERRED
INITIAL EXERCISE PRICE: $1.25 PER SHARE
ISSUE DATE: OCTOBER 11, 1995
EXPIRATION DATE: OCTOBER 10, 2000
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 INTENTIONALLY OMITTED.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company, provided, however, that if this Warrant is being
exercised in connection with the underwritten public offering of the Company's
common
<PAGE> 2
stock, the fair market value of the Shares shall be the middle of the range of
the proposed public offering price as set forth on the cover of the preliminary
prospectus as such is filed with the Securities and Exchange Commission. If the
Shares are not traded in a public market or are not being offered in connection
with the public offering of the Company's common stock, the Board of Directors
of the Company shall determine fair market value in its reasonable good faith
judgment. The foregoing notwithstanding, if Holder advises the Board of
Directors in writing that Holder disagrees with such determination, then the
Company and Holder shall promptly agree upon a reputable investment banking firm
to undertake such valuation. If the valuation of such investment banking firm is
greater than that determined by the Board of Directors, then all fees and
expenses of such investment banking firm shall be paid by the Company. In all
other circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Nonassumption. If upon the closing of any Acquisition
the successor entity does not assume the obligations of this Warrant and Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. Purchase Right. Notwithstanding the foregoing, at the
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of
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<PAGE> 3
any Acquisition for an amount equal to (a) the fair market value of any
consideration that would have been received by Holder in consideration of the
Shares had Holder exercised the unexercised portion of this Warrant immediately
before the record date for determining the shareholders entitled to participate
in the proceeds of the Acquisition, less (b) the aggregate Warrant Price of the
Shares, but in no event less than zero; provided, however, that this section
shall not apply in the event that the Acquisition is being accounted for as a
pooling of interests and any such payment would prevent such accounting
treatment from being elected.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The number of shares of common
stock issuable upon conversion of the Shares, shall be subject to adjustment,
from time to time in the manner set forth on Exhibit A in the event of Diluting
Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution,
-3-
<PAGE> 4
issue, or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed under this Warrant by the Company, but shall at all times in good
faith assist in carrying out of all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash,
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<PAGE> 5
then, in connection with each such event, the Company shall give Holder (1) at
least 10 days prior written notice of the date on which a record will be taken
for such dividend, distribution, or subscription rights (and specifying the date
on which the holders of common stock will be entitled thereto) or for
determining rights to vote, if any, in respect of the matters referred to in (c)
and (d) above; (2) in the case of the matters referred to in (c) and (d) above
at least 10 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of common stock will be entitled
to exchange their common stock for securities or other property deliverable upon
the occurrence of such event); and (3) in the case of the matter referred to in
(e) above, the same notice as is given to the holders of such registration
rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date set forth above.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions
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<PAGE> 6
reasonably satisfactory to the Company, as reasonably requested by the Company).
The Company shall not require Holder to provide an opinion of counsel if the
transfer is to an affiliate of Holder or if there is no material question as to
the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
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<PAGE> 7
4.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
AccelGraphics, Inc.
By: /s/ Nancy E. Bush
------------------------
Name: Nancy E. Bush
------------------------
Title: CFO
------------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
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<PAGE> 8
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ________ shares of the
Common/Series ___ Preferred [strike one] Stock of
___________________________________________________ pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ____________________________ of the Shares covered
by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
- ------------------------
(Name)
- ------------------------
(Address)
- ------------------------
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
- ------------------------
(Signature)
- ------------------------
(Date)
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<PAGE> 9
EXHIBIT A
ANTI-DILUTION PROVISIONS
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon
conversion of the Series A Preferred shares shall be adjusted in accordance with
those provisions (the "Provisions") of the Company's Articles (Certificate) of
Incorporation which apply to Diluting Issuances.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
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<PAGE> 10
EXHIBIT B
REGISTRATION RIGHTS
The common stock issuable upon conversion of the Shares, shall be
deemed "registrable securities" or otherwise entitled to registration rights in
accordance with the terms of the following agreement between the Company and its
investor(s), and Holder shall be entitled to all the rights thereunder
pertaining to holders of Series A Preferred Stock:
Amended and Restated Rights Agreement dated June 20, 1995, by
and among the Company and the various investors as set forth on the Exhibit A
thereto
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<PAGE> 1
EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
Issued: July 1, 1996 SB-1
ACCELGRAPHICS, INC.
WARRANT TO PURCHASE
14,000 SHARES OF
SERIES B PREFERRED STOCK
1. Number and Price of Shares Subject to Warrant.
(a) Warrant Purchase Agreement. This Series B Preferred Stock
Warrant is executed and delivered by AccelGraphics, Inc., a California
corporation (the "COMPANY") pursuant to that certain Master Equipment Lease No.
053-0021 dated as of July 1, 1996 (the "AGREEMENT"), executed and delivered by
the Company and Phoenix Leasing Incorporated (the "PURCHASER").
(b) Term. Subject to the terms and conditions herein set
forth, at Purchaser's option, Purchaser is entitled to purchase from the Company
at any time after the date of this Warrant and on or before the earlier of (i)
July 1, 2006, or (ii) the closing of a transaction or series of transactions
involving the Company's sale of all or substantially all of its assets or the
acquisition of the Company by another entity by means of merger or other
transaction as a result of which shareholders of the Company immediately prior
to such acquisition possess a minority of the voting power of the surviving
entity immediately following such acquisition (a "MERGER"), or (iii) the closing
of the initial public offering of the Company's Common Stock registered under
the Securities Act of 1933, as amended (the "1933 ACT"), up to 14,000 shares
(which number of shares is subject to adjustment as described below) of fully
paid and nonassessable Series B Preferred Stock of the Company.
(c) Warrant Price. Subject to adjustment as hereinafter
provided, the purchase price of one share of Series B Preferred Stock shall be
equal to $1.50 per share. The purchase price of one share of Series B Preferred
Stock (or such securities as may be substituted for one share of Series B
Preferred Stock pursuant to the provisions hereinafter set forth) payable from
time to time upon the exercise of this Warrant (whether such price be the price
specified above or an adjusted price determined as hereinafter provided) is
referred to herein as the "WARRANT PRICE."
<PAGE> 2
2. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities issuable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the happening of certain events as follows:
(a) Adjustment for Dividends in Stock or Other Securities or
Property. In case at any time or from time to time on or after the date hereof
the holders of the Series B Preferred Stock of the Company (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received, or, on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled to receive,
without payment therefor, other or additional stock or other securities or
property (other than cash) of the Company by way of dividend, then and in each
case, the holder of this Warrant shall, upon the exercise hereof, be entitled to
receive, in addition to the number of shares of Series B Preferred Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company which such holder would hold on the
date of such exercise had it been the holder of record of such Series B
Preferred Stock on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock available by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
paragraphs (b) and (c) of this Section 2.
(b) Adjustment for Reclassification, Reorganization or Merger.
In case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other corporation the
stock or securities of which are at the time receivable upon the exercise of
this Warrant) or any similar corporate reorganization on or after the date
hereof, then and in each such case the holder of this Warrant, upon the exercise
hereof at any time after the consummation of such reclassification, change,
reorganization, merger or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise hereof
prior to such consummation, the stock or other securities or property to which
such holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in paragraphs (a) and (c) of this Section 2; and in each
such case, the terms of this Section 2 shall be applicable to the shares of
stock or other securities properly receivable upon the exercise of this Warrant
after such consummation.
(c) Stock Splits and Reverse Stock Splits. If at any time on
or after the date hereof the Company shall subdivide its outstanding shares of
Series B Preferred Stock into a greater number of shares, the Warrant Price in
effect immediately prior to such subdivision shall thereby be proportionately
reduced and the number of shares receivable upon exercise of the Warrant shall
thereby be proportionately increased; and, conversely, if at any time on or
after the date hereof the outstanding number of shares of Series B Preferred
Stock shall be combined into a smaller number of shares, the Warrant Price in
effect immediately prior to such combination shall thereby be proportionately
increased and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.
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<PAGE> 3
3. No Fractional Shares. No fractional shares of Series B Preferred
Stock will be issued in connection with any exercise hereunder. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the Fair Market Value (as
defined below) of one share of Series B Preferred Stock on the date of exercise.
4. No Shareholder Rights. This Warrant represents only the right to
purchase shares of Series B Preferred Stock of the Company and shall not
otherwise entitle its holder to any of the rights of a shareholder of the
Company unless and until it is exercised in accordance with the terms hereof.
5. Exercise of Warrant.
(a) Method of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, by the surrender of
this Warrant at the principal office of the Company, accompanied by the
completed and executed Notice of Exercise (attached hereto as Exhibit A) and
payment of the Warrant Price. The Warrant Price may be paid (i) by check, of an
amount equal to the then applicable Warrant Price per share multiplied by the
number of shares of Series B Preferred Stock then being purchased, (ii) by
cancellation of any present or future indebtedness from the Company to the
holder hereof in an amount equal to the then applicable Warrant Price per share
multiplied by the number of shares of Series B Preferred Stock then being
purchased, or (iii) pursuant to the net exercise provisions set forth in Section
5(b) below. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Series B
Preferred Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable on or after such date and in any event within five (5)
business days thereafter, the Company at its expense shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Series B Preferred Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share as provided
above, and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the portion of the shares of Series B Preferred Stock, if
any, with respect to which this Warrant shall not have been exercised, shall
also be issued to the holder hereof.
(b) Net Issue Exercise.
(i) In lieu of exercising this Warrant in the manner
provided above in Section 5(a), the holder hereof may elect to receive shares
equal to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
the Notice of Exercise (attached hereto as Exhibit A) in which event the Company
shall issue to holder a number of shares of the Company's Series B Preferred
Stock computed using the following formula:
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<PAGE> 4
X = Y (A - B)
--------
A
Where: X = The number of shares of Series B Preferred Stock
to be issued to holder.
Y = The number of shares of Series B Preferred Stock
purchasable under this Warrant (at the date of such
calculation).
A = The Fair Market Value (as defined below) of one
share of the Company's Series B Preferred Stock (at
the date of such calculation).
B = The Warrant Price (as adjusted to the date of
such calculation).
(ii) The term "FAIR MARKET VALUE" means the price per
share which the Company could obtain from a willing buyer for the shares sold by
the Company from authorized but unissued shares, as such price shall be
determined in good faith by the Board of Directors of the Company.
6. Certificate of Adjustment. Whenever the Warrant Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
7. Transfer of Warrant. Except for transfers to any wholly-owned
subsidiary or parent of, or to any corporation or entity that is within the
meaning of the 1933 Act, controlling, controlled by or under common control with
Purchaser, this Warrant may not be transferred by Purchaser without the written
consent of the Company.
8. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. Purchaser shall have the registration rights
contained in the Amended and Restated Rights Agreement dated as of March 7, 1996
between the Company and certain shareholders of the Company, as set forth on
Exhibit A thereto (the "RIGHTS AGREEMENT").
10. Financial Information. The Company shall deliver to Purchaser,
concurrent with delivery to any of the Holders, as defined in the Rights
Agreement, all information delivered to any of the Holders pursuant to Section
4.2(a) of the Rights Agreement and all other information
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<PAGE> 5
delivered to any of the Holders from time to time pursuant to the Rights
Agreement as in effect from time to time during the term hereof. If the Rights
Agreement is terminated for any reason and for so long as the Company is not
subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company shall deliver to
Purchaser all information that was required to be delivered to any of the
Holders pursuant to Section 4.2(a) of the Rights Agreement, as in effect on the
date hereof.
11. Miscellaneous. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. This Warrant may be changed, waived, discharged or terminated only by an
instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be mailed by first class registered or certified mail, postage
prepaid, to the address furnished to the Company in writing by the last holder
of this Warrant who shall have furnished an address to the Company in writing.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provisions.
12. Attorney's Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Warrant, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
13. Notice. The Company shall give Purchaser written notice of any
sale, merger, consolidation or public offering referred to in Section 1(b) or
any cash dividend declared on the Company's Series B Preferred Stock at least
ten (10) days prior to the closing of any such sale, merger, consolidation or
public offering or the record date fixed for the determination of shareholders
eligible for such dividend and shall deliver a copy of the preliminary
prospectus with respect to any such public offering to Purchaser promptly after
it becomes available.
This Series B Preferred Stock Warrant is issued as of the 1st day of
July, 1996.
ACCELGRAPHICS, INC.
By: /s/ Nancy E. Bush
______________________________
Nancy E. Bush, Chief Financial
Officer and Vice President,
Operations
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<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE
To: Secretary of AccelGraphics, Inc.
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___) hereby irrevocably elects to purchase ________ shares of the
Series B Preferred Stock of AccelGraphics, Inc. covered by such Warrant. The
undersigned herewith makes payment of $____________, representing the full
purchase price for such shares at the price per share provided for in such
Warrant. Such payment takes the form of (check applicable box or boxes):
\ \ a check for $_______ in lawful money of the United States;
\ \ cancellation of $________ of indebtedness from the Company to
the undersigned; or
\ \ the cancellation of such portion of the attached Warrant as is
exercisable for a total of ________ Warrant Shares (using a
Fair Market Value of $_________ per share for purposes of this
calculation).
Date: _____________ Signature: ____________________
Address: ____________________
____________________
____________________
<PAGE> 1
EXHIBIT 4.5
ACCELGRAPHICS, INC.
CONVERTIBLE NOTE
PURCHASE AGREEMENT
December 22, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Purchase and Sale of Promissory Note.......................................... 1
1.1 Sale and Issuance of Subordinated Convertible Promissory Note....... 1
2. Representations and Warranties of the Company................................. 1
2.1 Organization, Good Standing and Qualification........................ 1
2.2 Capitalization....................................................... 2
2.3 Subsidiaries......................................................... 2
2.4 Authorization........................................................ 2
2.5 Valid Issuance of Securities......................................... 3
2.6 Governmental Consents................................................ 3
2.7 Litigation........................................................... 3
2.8 Patents and Trademarks............................................... 3
2.9 Compliance with Other Instruments.................................... 5
2.10 Agreements; Action................................................... 5
2.11 Disclosure........................................................... 6
2.12 Rights of Registration and First Offer............................... 6
2.13 Corporate Documents.................................................. 6
2.14 Title to Property and Assets......................................... 6
2.15 No Financial Statements.............................................. 6
2.16 Employee Benefit Plans............................................... 6
2.17 Tax Returns and Payments............................................. 7
2.18 Insurance............................................................ 7
2.19 Labor Agreements and Actions......................................... 7
3. Representations and Warranties of the Purchaser............................... 7
3.1 Authorization........................................................ 7
3.2 Purchase Entirely for Own Account.................................... 8
3.3 Disclosure of Information............................................ 8
3.4 Investment Experience................................................ 8
3.5 Restricted Securities................................................ 8
3.6 Further Limitations on Disposition................................... 9
3.7 Legends.............................................................. 9
3.8 Accredited Investor.................................................. 10
4. California Commissioner of Corporations....................................... 10
4.1 Corporate Securities Law............................................. 10
5. Conditions of Purchaser' Obligations at Closing............................... 10
5.1 Representations and Warranties....................................... 10
5.2 Performance.......................................................... 10
5.3 Compliance Certificate............................................... 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.4 Qualifications....................................................... 10
5.5 Proceedings and Documents............................................ 10
5.6 Opinion of Company Counsel........................................... 11
5.7 Rights Agreement..................................................... 11
5.8 Asset Purchase Agreement............................................. 11
5.9 Board of Directors................................................... 11
6. Conditions of the Company's Obligations at Closing............................ 11
6.1 Representations and Warranties....................................... 11
6.2 California Qualification............................................. 11
6.3 Asset Purchase Agreement............................................. 11
7. Miscellaneous................................................................. 11
7.1 Survival of Warranties............................................... 11
7.2 Transfer; Successors and Assigns..................................... 12
7.3 Governing Law........................................................ 12
7.4 Counterparts......................................................... 12
7.5 Titles and Subtitles................................................. 12
7.6 Notices.............................................................. 12
7.7 Finder's Fee......................................................... 13
7.8 Expenses............................................................. 13
7.9 Amendments and Waivers............................................... 13
7.10 Severability......................................................... 13
7.11 Entire Agreement..................................................... 14
</TABLE>
EXHIBITS TO PURCHASE AGREEMENT
Exhibit A - Form of Amended and Restated Articles of Incorporation
Exhibit B - Form of Subordinated Convertible Promissory Note
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Rights Agreement
Exhibit E - Form of Asset Acquisition Agreement
Exhibit F - Form of Legal Opinion of Venture Law Group
-ii-
<PAGE> 4
CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT (the "AGREEMENT") is made and
is effective as of December 22, 1994 by and between AccelGraphics, Inc., a
California corporation (the "COMPANY") and Kubota Corporation, a Japanese
corporation (the "PURCHASER").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Promissory Note.
1.1 Sale and Issuance of Subordinated Convertible Promissory
Note.
(a) The Company shall adopt and file with the
Secretary of State of the State of California on or before the Closing (as
defined below) the Amended and Restated Articles of Incorporation in the form
attached hereto as Exhibit A (the "ARTICLES").
(b) Subject to the terms and conditions of this
Agreement, the Purchaser agrees to purchase at the Closing and the Company
agrees to sell and issue to the Purchaser at the Closing a subordinated
convertible promissory note in substantially the form attached hereto as Exhibit
B, carrying an initial aggregate principal amount of $3,300,000 (the "NOTE").
(c) The purchase and sale of the Note shall take
place at the offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park,
California, at 10:00 a.m., on December 22, 1994, or at such other time and place
as the Company and the Purchaser mutually agree upon, orally or in writing
(which time and place are designated as the "CLOSING"). At the Closing, the
Company shall deliver to the Purchaser an executed Note against delivery to the
Company by the Purchaser of the aggregate purchase price therefor ($3,300,000),
by wire transfer to the Company's designated bank account.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, specifically identifying the
relevant subsection hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its busi ness as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:
<PAGE> 5
(i) Preferred Stock. 8,000,000 shares of Preferred
Stock, of which 3,700,000 shares have been designated Series A Preferred Stock,
none of which are issued and outstanding prior to the Closing. The rights,
privileges and preferences of the Series A Preferred Stock are as stated in the
Articles.
(ii) Common Stock. 12,000,000 shares of Common Stock,
1,213,750 shares of which are issued and outstanding immediately prior to the
Closing.
(iii) Except for the conversion privileges of the
Series A Preferred Stock, the Note or as stated below, there are no outstanding
options, warrants, rights (including conversion or preemptive rights) or
agreements, orally or in writing, for the purchase or acquisition from the
Company of any shares of its capital stock. The Company has reserved 1,336,250
shares of Common Stock for issuance, at the discretion of the Board of
Directors, to officers, directors, employees and consultants pursuant to equity
incentive plans adopted by the Board of Directors and approved by the Company's
shareholders.
2.3 Subsidiaries. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Rights Agreement in
the form attached hereto as Exhibit D (the "RIGHTS AGREEMENT"), and the Asset
Purchase Agreement in the form attached hereto as Exhibit E (the "ASSET PURCHASE
AGREEMENT" and collectively with the Agreement and the Rights Agreement, the
"AGREEMENTS"), the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance and delivery of the Note, Series A
Preferred Stock issuable upon conversion of the Note and the Common Stock
issuable upon conversion of such Preferred Stock (the Note, the Series A
Preferred Stock issuable upon conversion thereof, the Common Stock issuable upon
conversion of such Preferred Stock and any other securities issuable upon
conversion of the Note or any securities issuable upon conversion of such
securities are collectively referred to as the "SECURITIES") has been taken or
will be taken prior to the Closing (or has been or will be taken prior to
conversion in the case of the Note), and the Agreements, when executed and
delivered by the Company, shall constitute valid and legally binding obligations
of the Company, enforceable against the Company in accordance with their terms
except (1) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws of general application
affecting enforcement of creditor's rights generally, as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, or (ii) to the extent the indemnification provisions
contained in the Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 Valid Issuance of Securities. The Note that is being
issued to the Purchaser hereunder, when issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, will be duly and
validly issued and free of restrictions on transfer other than restrictions on
transfer under this Agreement, the terms of the Note, the Rights
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<PAGE> 6
Agreement and applicable state and federal securities laws. Based in part upon
the representations of the Purchaser in this Agreement and subject to the
provisions of Section 2.6 below, the Note will be issued in compliance with all
applicable federal and state securities laws. The Series A Preferred Stock
issuable upon conversion of the Note and the Common Stock issuable upon
conversion of such Preferred Stock has been duly and validly reserved for
issuance, and upon issuance in accordance with the terms of the Note and the
Articles, shall be duly and validly issued, fully paid and nonassessable and
free of restrictions on transfer other than restrictions on transfer under this
Agreement, the Note, the Rights Agreement and applicable state and federal
securities laws and will be issued in compliance with all applicable federal and
state securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filings pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules thereunder.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of the Agreements or the right of the Company to enter into them,
or to consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse changes
in the assets, condition or affairs of the Company, financially or otherwise, or
any change in the current equity ownership of the Company, nor is the Company
aware that there is any basis for the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Patents and Trademarks. Immediately following the Closing,
the Company will have sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity.
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<PAGE> 7
2.9 Compliance with Other Instruments.
(a) The Company is not in violation or default of any
provisions of its Articles or Bylaws or of any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound or, to
its knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company. The execution, delivery and performance of the
Agreements and the consummation of the transactions contemplated hereby or
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company.
(b) The Company has avoided every condition, and has
not performed any act, the occurrence of which would result in the Company's
loss of any right granted under any license, distribution or other agreement.
2.10 Agreements; Action.
(a) There are no agreements, understandings or
proposed trans actions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by
the Agreements, there are no agreements, understandings, instruments, contracts
or proposed transactions to which the Company is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to the
Company in excess of, $10,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $10,000 or
in excess of $50,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Articles or Bylaws, that adversely affects its business as now conducted or as
proposed to be conducted, its properties or its financial condition.
(e) The Company has not engaged in the past three (3)
months in any discussion (i) with any representative of any corporation or
corporations regarding the merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of
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<PAGE> 8
related transactions in which more than fifty percent (50%) of the voting power
of the Company is disposed of, or (iii) regarding any other form of liquidation,
dissolution or winding up of the Company.
2.11 Disclosure. The Company has fully provided the Purchaser
with all the information which the Purchaser has requested for deciding whether
to acquire the Securities and all information which the Company believes is
reasonably necessary to enable such party to make such decision. No
representation or warranty of the Company contained in this Agreement, the
Exhibits attached hereto or any certificate furnished or to be furnished to the
Purchaser at the Closing (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
2.12 Rights of Registration and First Offer. Except as
contemplated herein, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity. At the
Closing, the Company will enter into the Rights Agreement between the Company
and the Purchaser.
2.13 Corporate Documents. The Articles and Bylaws of the
Company are in the form provided to counsel for the Purchaser.
2.14 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.15 No Financial Statements. The Company has not prepared any
balance sheet, income statement, statement of operations, statement of changes
in financial position and shareholders' equity or other financial statement. The
Company has no material assets other than its rights under this Agreement or as
contemplated hereby. The Company has not engaged in any business, generated any
revenues, entered into or become bound by any contracts, agreements or
commitments of any kind (other than this Agreement and the commitments expressly
provided for in this Agreement), in any case involving obligations of the
Company in excess of $50,000 or any licenses or agreements regarding the trade
secrets, copyrights, patents, technology or intellectual property owned by the
Company or any third party.
2.16 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
2.17 Tax Returns and Payments. The Company has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due.
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<PAGE> 9
2.18 Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.19 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
The employment of each officer and employee of the Company is terminable at the
will of the Company. To the best of its knowledge, the Company has complied in
all material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment.
2.21 Permits. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company and believes that it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
3. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company that:
3.1 Authorization.
(a) This Agreement constitutes its valid and legally
binding obligation, enforceable against the Purchaser in accordance with its
terms.
(b) That all corporate action on the part of the
Purchaser, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Purchaser hereunder has been taken or will be taken prior
to the Closing. The Purchaser further represents that the execution, delivery
and performance of this Agreement and the other agreements contemplated hereby
will not result in any violation of, be in conflict with or constitute a default
under, any provisions of its charter documents or of any instrument, judgment,
order, writ, decree or contract to which the Purchaser is a party or by which it
is bound or, to the Purchaser's knowledge, of any provision of any federal or
state statute, rule or regulation applicable to the Purchaser.
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<PAGE> 10
3.2 Purchase Entirely for Own Account. This Agreement is made
with the Purchaser in reliance upon the Purchaser's representation to the
Company, which by the Purchaser's execution of this Agreement the Purchaser
hereby confirms, that the Securities to be acquired by the Purchaser will be
acquired for investment for the Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities. The Purchaser represents that it
has full power and authority to enter into this Agreement.
3.3 Disclosure of Information. The Purchaser believes it has
received all the information it considers necessary or appropriate for deciding
whether to acquire the Securities. The Purchaser further represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Purchaser to
rely thereon.
3.4 Investment Experience. The Purchaser has substantial
experience in evaluating and investing in private placement transactions so that
Purchaser is capable of evaluating the merits and risks of the Purchaser's
investment in the Company. The Purchaser, by reason of its business or financial
experience or the business or financial experience of its professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, has the
capacity to protect its own interests in connection with the purchase of the
Securities hereunder.
3.5 Restricted Securities. The Purchaser understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Securities Act of 1933, as amended only in certain limited circumstances. In
this connection, the Purchaser represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Securities Act.
3.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Purchaser further agrees not
to make any disposition of all or any portion of the Securities unless and
until:
(a) There is then in effect a Registration Statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
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<PAGE> 11
(b) (i) The Purchaser shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration under the Securities Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Purchaser to a constituent stockholder or
constituent partner (including any constituent of a constituent) of the
Purchaser, if the transferee or transferees agree in writing to be subject to
the terms hereof to the same extent as if they were the Purchaser hereunder.
3.7 Legends. The Purchaser understands that the Securities,
and any securities issued in respect thereof or exchange therefor, may bear one
or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any
other state to the extent such laws are applicable to the shares represented by
the certificate so legended.
3.8 Accredited Investor.. The Purchaser is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the Act.
4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT
IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
-8-
<PAGE> 12
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS
SO EXEMPT.
5. Conditions of Purchaser's Obligations at Closing. The obligations of
the Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before each Closing, of each of the following conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
5.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall
deliver to the Purchaser at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 Qualifications. The Commissioner of Corporations of the
State of California shall have issued a permit qualifying the offer and sale of
the Securities to the Purchaser pursuant to this Agreement, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
5.6 Opinion of Company Counsel. The Purchaser shall have
received from Venture Law Group, counsel for the Company, an opinion, dated as
of the Closing, in substantially the form of Exhibit F.
5.7 Rights Agreement. The Company and the Purchaser shall have
executed and delivered the Rights Agreement.
5.8 Asset Purchase Agreement. The Company and Kubota Graphics
Corporation shall have executed and delivered the Asset Purchase Agreement and
all conditions to closing in such Asset Purchase Agreement shall have been
satisfied or waived.
5.9 Board of Directors. The Board of Directors of the Company
as of the Closing shall be comprised of Jeffrey W. Dunn, Nancy E. Bush, and a
designee of the Purchaser, with two vacancies.
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<PAGE> 13
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
6.2 California Qualification. The Commissioner of Corporations
of the State of California shall have issued a permit qualifying the offer and
sale to the Purchaser of the Securities or such offer and sale shall be exempt
from such qualification under the California Corporate Securities Law of 1968,
as amended.
6.3 Asset Purchase Agreement. The Company and Kubota Graphics
Corporation shall have executed and delivered the Asset Purchase Agreement and
all conditions to closing in such Asset Purchase Agreement shall have been
satisfied or waived.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations
and covenants of the Company and the Purchaser contained in or made pursuant to
this Agreement shall survive for a period of one year the execution and delivery
of this Agreement and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchaser or the Company.
7.2 Transfer; Successors and Assigns. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California in the United States of
America as applied to agreements among California residents entered into and to
be performed entirely within California.
7.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
-10-
<PAGE> 14
7.6 Notices.
(a) All notices, requests, demands and other
communications under this Agreement or in connection herewith shall be given to
or made:
If to the Purchaser, to: Kubota Corporation
2800 Lakeside Drive, Suite 131
Santa Clara, CA 95054
Attn: General Manager
Phone: (408) 727-9415
Fax: (408) 727-1428
If to the Company, to: AccelGraphics, Inc.
2630 Walsh Avenue
Santa Clara, CA 95051
Attn: President
Phone: (408)987-5896
Fax: (408)748-6392
With a copy to: Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Michael W. Hall
Phone: (415) 854-4488
Fax: (415) 854-1121
(b) All notices, requests, demands and other
communications given or made in accordance with the provisions of this Agreement
shall be in writing, and shall be sent by airmail, return receipt requested, or
by telex or telecopy (facsimile) with confirmation of receipt, and shall be
deemed to be given or made when receipt is so confirmed.
(c) Any party may, by written notice to the other,
alter its address or respondent, and such notice shall be considered to have
been given twenty (20) days after the airmailing, or one (1) day after the
telexing or telecopying thereof.
7.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. The Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Purchaser or any of its officers, employees,
or representatives is responsible, except as set forth above.
The Company agrees to indemnify and hold harmless the
Purchaser from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and
-11-
<PAGE> 15
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
7.8 Expenses. Each of the Company and the Purchaser shall bear
their own expenses incurred with respect to this Agreement and the transactions
contemplated hereby. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Purchaser.
Any amendment or waiver effected in accordance with this Section shall be
binding upon each transferee of any Securities, each future holder of all such
Securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.11 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
IN WITNESS WHEREOF, the parties have executed this Convertible Note
Purchase Agreement as of the date first above written.
COMPANY: PURCHASER:
ACCELGRAPHICS, INC. KUBOTA CORPORATION
By: /s/ Jeffrey W. Dunn By: /s/ Osamu Okamoto
- ---------------------------------- ------------------------------
Jeffrey W. Dunn, President
Title: Executive Managing Director
-12-
<PAGE> 16
EXHIBIT A,B,D,E & F
refer to Tab 5, 10, 11, 3 & 14
<PAGE> 17
EXHIBIT C
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
Set forth below are exceptions to the representations and warranties of
the Company made in Section 2 of the Convertible Note Purchase Agreement (the
"AGREEMENT") dated as of December 22, 1994. All disclosures and exceptions are
intended to modify all of the Company's representations and warranties, and the
Section headings used below are for convenience only. Capitalized terms have the
same meanings ascribed to them in the Agreement, unless otherwise specified.
1. Section 2.2(iii) - Capitalization. The Company's directors and
shareholders have authorized the reservation of up to 1,336,250 shares of Common
Stock for issuance to employees, officers, directors and consultants pursuant to
its 1994 Stock Plan (the "PLAN"). The Company intends to file a permit
application with the Department of Corporations of California for a permit
authorizing the issuance of 1,336,250 shares of Common Stock under the Plan.
2. Section 2.8. The Company is taking title to its patents, copyrights,
trade secrets and all other intangible assets and intellectual property rights
pursuant to and subject to the Asset Acquisition Agreement in which Kubota
Graphics Corporation has not given the Company any representation and warranty
regarding the quality of the title, rights and interest of any of the Purchased
Assets (as defined in the Asset Purchase Agreement) that the Company is
acquiring. Accordingly, the representation and warranty contained in Section 7.8
of the Agreement is made only based on the Company's knowledge.
3. Section 2.10(a) - Agreements. The Company has entered into Founder's
Stock Purchase Agreement's with Jeffrey W. Dunn, member of the Company's Board
of Directors and President of the Company, Nancy E. Bush, member of the
Company's Board of Directors and Chief Financial Officer of the Company, and
Greg Milliken, the Company's Vice President of Marketing, providing for the sale
of the Company's Common Stock to such persons. Under the terms of each
agreement, the Company has retained a right of first refusal to repurchase the
stock should the founder attempt to sell such stock to another party.
Furthermore, each Agreement contains a provision that the Company shall be
entitled to repurchase the unvested portion of such founder's stock should the
founder's employment or consulting relationship with the Company be terminated.
Copies of the agreements have been provided to counsel for the Purchasers.
4. Section 2.14 - Title to Property and Assets. Reference is made to
the exception set forth in Section 2.8 above regarding the acquisition of the
Company's assets pursuant to the Asset Acquisition Agreement. Accordingly, the
representation and warranty contained in Section 2.14 of the Agreement is made
only based on the Company's knowledge.
5. Section 2.18 - Insurance. The Company has not yet retained a fire
and casualty insurance policy. Promptly following Closing, the Company intends
to obtain such a policy with extended coverage, sufficient in amount (subject to
deductibles) to allow it to replace its properties that might be damaged or
destroyed.
C-1
<PAGE> 1
Exhibit 5.1
___________________, 1997
AccelGraphics, Inc.
1942 Zanker Road
San Jose, CA 95112-9704
REGISTRATION STATEMENT ON FORM SB-2; FILE NO.
Ladies and Gentlemen:
We have examined the Registration Statement on Form SB-2 (File No.
__________) (the "Registration Statement") filed by you, AccelGraphics, Inc.,
with the Securities and Exchange Commission on _____________ in connection with
the registration under the Securities Act of 1933, as amended, of ___________
shares of your Common Stock (the "Shares"). The Shares include an over-allotment
option to purchase _____________ shares granted to the Underwriters. As your
counsel in connection with this transaction, we have examined the proceedings
taken and are familiar with the proceedings proposed to be taken by you in
connection with the sale and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the manner
described in the Registration Statement will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
<PAGE> 1
Exhibit 9.1
AMENDED AND RESTATED VOTING AGREEMENT
This Amended and Restated Voting Agreement (the "AGREEMENT") is made
and entered into as of this 7th day of March 1996 by and among AccelGraphics,
Inc., a California corporation (the "COMPANY"), the Founders listed on Exhibit A
attached hereto (the "FOUNDERS"), the holders of the Company's Series A
Preferred Stock (the "SERIES A HOLDERS"), and the holders of the Company's
Series B Preferred Stock (the "SERIES B HOLDERS" and collectively with the
Series A Holders, the "INVESTORS"), all as set forth on Exhibit A attached
hereto.
RECITALS
A. The Company, the Founders and the Series A Holders have entered into
a Voting Agreement (the "PRIOR VOTING AGREEMENT") dated as of June 15, 1995
pursuant to which the Investors and the Founders implemented certain voting
provisions with respect to the election of directors.
B. The Company and the Series B Holders have entered into the Series B
Preferred Stock Purchase Agreement (the "SERIES B PURCHASE AGREEMENT") of even
date herewith, pursuant to which the Company sold, and the Series B Holders
acquired, Series B Preferred Stock of the Company.
C. A condition to the obligations of the Series B Holders under the
Purchase Agreement is that the Company, the Founders and the Investors enter
into this Agreement for the purpose of setting forth the terms and conditions
under which the Investors and the Founders shall, in certain cases, vote their
shares of the Company's voting stock in favor of certain designees to the
Company's Board of Directors.
D. The Company, the Founders, and the Series A Holders desire to amend
and restate the Prior Voting Agreement to include the Series B Holders and make
certain other changes.
In consideration of the mutual covenants and agreements contained
herein and for other valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Election of Directors.
1.1 Election of Directors. At any annual or special meeting
called, or any other action taken, for the purpose of electing directors to the
Company's Board of Directors, each Investor and Founder agrees to vote all
shares of capital stock of the Company beneficially owned by such Investor or
Founder (whether currently owned or hereafter acquired) as follows in each
election of directors of the Company:
(a) For so long as AVI Capital L.P. ("AVI") or any of
its affiliates holds at least five percent (5%) of the capital stock of the
Company, for the election of Peter L. Wolken or another representative of AVI;
<PAGE> 2
(b) For so long as Advanced Technology Ventures IV
("ATV") or any of its affiliates holds at least five percent (5%) of the capital
stock of the Company, for the election of Jos C. Henkens or another
representative of ATV;
(c) For so long as STF II, L.P. ("STF") or any of its
affiliates holds at least five percent (5%) of the capital stock of the Company,
for the election of David E. Gold or another representative of STF;
(d) For so long as Kubota Corporation ("KUBOTA") or
any of its affiliates holds at least five percent (5%) of the capital stock of
the Company, for the election of Fuyuhiko Usui or another representative of
Kubota;
(e) For so long as Jeffrey W. Dunn remains the Chief
Executive Officer or President of the Company or holds at least two percent (2%)
of the capital stock of the Company, for the election of Jeffrey W. Dunn; and
(f) For so long as Nancy E. Bush remains the Chief
Financial Officer of the Company or holds at least two percent (2%) of the
capital stock of the Company, for the election of Nancy E. Bush.
1.2 Appointment of Directors. In the event of the resignation,
death, removal or disqualification of a director selected by the Investors, such
Investors shall promptly nominate a new director and, after written notice of
the nomination has been given by such Investors to the other parties, each
Founder and Investor shall promptly vote its shares of capital stock of the
Company to elect such nominee to the Board of Directors.
1.3 Removal. The Investors may at any time and from time to
time, remove, with or without cause (subject to the Bylaws of the Company as in
effect from time to time and any requirements of law), in their sole discretion,
their designated director or directors and, after written notice to each of the
parties hereto of the new nominee(s) to replace such director(s), each Investor
shall promptly vote its shares of capital stock of the Company to elect such
nominee to the Board of Directors of the Company.
1.4 Other Voting. This Agreement shall not extend to voting
upon questions and matters (other than the election of directors) upon which
shareholders of the Company have a right to vote under the Articles of
Incorporation or Bylaws of the Company or under the laws of the State of
California.
2. No Revocation. The voting agreements contained herein are coupled
with an interest and may not be revoked during the term of this Agreement.
3. Legend on Certificates. Each certificate representing shares held by
the Investors and Founders, and any assignees or transferees thereof, shall bear
the following legend:
-2-
<PAGE> 3
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A VOTING AGREEMENT BETWEEN THE
CORPORATION AND CERTAIN SHAREHOLDERS OF THE
CORPORATION. COPIES OF THE VOTING AGREEMENT
MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE
SECRETARY OF THE COMPANY.
4. Transfer of Rights. No Founder or Investor shall sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, any
shares of capital stock then owned by such Investor or Founder unless the person
acquiring such capital stock of the Company shall first become a signatory to
this Agreement, agreeing to be bound by all the terms of this Agreement to the
same extent as if such person had been an original signatory hereto. The Company
shall not transfer any shares of its capital stock on its books which shall have
been sold, assigned or otherwise transferred in violation of this Agreement, or
to treat as owner of such shares of its capital stock, or to record the right to
vote as such owner or to pay dividends to, any person or organization to which
any such shares of its capital stock shall have been sold, assigned or otherwise
transferred, from and after any sale, assignment or transfer of any share of its
capital stock made in violation of this Agreement.
5. Term. This Agreement shall be effective as of the date first above
written and shall terminate and be of no further force or effect upon the
earlier to occur of (a) the consummation of the Company's sale of its Common
Stock in a bona fide, firm commitment underwriting pursuant to a registration
statement under the Securities Act of 1933, as amended (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction), (b) such time as the Company becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, or
(c) the tenth anniversary of the effective date of this Agreement.
6. Miscellaneous.
6.1 Notices.
(a) All notices, requests, demands and other
communications under this Agreement or in connection herewith shall be given to
or made upon the Investors or the Founders at the addresses set forth below each
person's name on Exhibit A attached hereto, and, if to the Company, to:
AccelGraphics, Inc., 1942 Zanker Road, San Jose, CA 95112-9704, attention:
President.
(b) All notices, requests, demands and other
communications given or made in accordance with the provisions of this Agreement
shall be in writing, and shall be sent by airmail, return receipt requested, or
by telex or telecopy (facsimile) with confirmation of receipt, and shall be
deemed to be given or made when receipt is so confirmed.
-3-
<PAGE> 4
(c) Any party may, by written notice to the other,
alter its address or respondent, and such notice shall be considered to have
been given five (5) days after the airmailing, telexing or telecopying thereof.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, portions of such provisions,
or such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
6.4 Entire Agreement; Modifications and Amendments. This
Agreement and the documents referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements existing among the parties hereto are
expressly canceled. This Agreement may be modified or amended only with the
written consent of the Company, each Founder and at least a majority of the
shares of Common Stock Equivalents held by the Investors or their permitted
successors or assigns. In no event shall such waiver of any rights hereunder
constitute the waiver of such rights in any future instance unless the waiver so
specifies in writing. Any amendment or waiver effected in accordance with this
Section 6.5 shall be binding upon each of the parties hereto and each transferee
of the Common Stock Equivalents.
6.5 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
entered into solely between residents of, and to be performed entirely within,
such state.
6.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.7 Best Efforts. The Company agrees to use its best efforts
to enforce the terms of this Agreement, to inform the Investors and the Founders
of any breach hereof and to assist the Investors and the Founders in the
exercise of their rights and performance of their obligations hereunder. The
Investors and each Founder expressly agree that the Investors, the Founders and
the Company will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any of the Founders or the Investors, each of
the Founders, the Investors and the Company shall, in addition to all other
remedies, each be entitled to a temporary or permanent
-4-
<PAGE> 5
injunction, without showing any actual damage, and/or a decree for specific
performance, in accordance with the provisions hereof.
6.8 Legal Fees. In the event of any action at law, suit in
equity or arbitration proceeding in relation to this Agreement or any shares or
other securities of the Company transferred hereunder, the prevailing party, or
parties, shall be paid by the other party or parties a reasonable sum for
attorneys' fees, costs and expenses in addition to any other relief to which
such prevailing party may be entitled.
6.9 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.10 Termination of Prior Rights. Effective and contingent
upon execution of this Agreement by each of the Founders and holders of a
majority of the capital stock owned by the holders of Series A Preferred Stock,
and upon the closing of the transactions contemplated by the Series B Purchase
Agreement, the Prior Voting Agreement is hereby declared null and void and is
amended and restated in its entirety to read as set forth in this Agreement, and
the Company, the Founders and the Investors hereby agree to be bound by the
provisions hereof as the sole agreement of the Company, the Founders and the
Investors with respect to certain voting rights. Upon termination of the Prior
Voting Agreement as aforesaid, this Agreement is hereby entered into on behalf
of all of the Founders and the Series A Holders as provided in Section 6.4 of
the Prior Voting Agreement.
-5-
<PAGE> 6
[Signature Pages Follow]
-6-
<PAGE> 7
IN WITNESS WHEREOF, this Voting Agreement has been executed by the
parties hereto as of the day and year first above written.
ACCELGRAPHICS, INC.
By:/s/ Jeffrey W. Dunn
------------------------------------------
Jeffrey W. Dunn, President
INVESTORS:
ADVANCED TECHNOLOGY VENTURES IV,
L.P.
By: ATV Associates IV, L.P.
Name:/s/ Jos C. Henkens
----------------------------------------
(print)
Title: General Partner
---------------------------------------
ASSET MANAGEMENT ASSOCIATES
1996, L.P.
By: AMC Partners 96, L.P.,
its General Partner
Name:/s/ W. Ferrell Sanders
----------------------------------------
(print)
Title: General Partner
---------------------------------------
ASSOCIATED VENTURE INVESTORS III,
L.P.
By: AVI Management Partners III, L.P.
Name:/s/ Barry Weinman
----------------------------------------
(print)
Title: General Partner
---------------------------------------
-7-
<PAGE> 8
AVI CAPITAL, L.P.
By: AVI Capital Management, L.P.,
its General Partner
Name:/s/ Barry Weinman
----------------------------------------
(print)
Title: General Partner
---------------------------------------
AVI PARTNERS GROWTH FUND II, L.P.
By: AVI Management Partners III, L.P.,
its General Partner
Name:/s/ Barry Weinman
----------------------------------------
(print)
Title: General Partner
---------------------------------------
AVI SILICON VALLEY PARTNERS, L.P.
By: AVI Management Partners III, L.P.
Name:/s/ Barry Weinman
----------------------------------------
(print)
Title: General Partner
---------------------------------------
KUBOTA CORPORATION
By:/s/ Kazuji Hashimoto
------------------------------------------
Name:Kazuji Hashimoto
(print)
Title: Managing Director
---------------------------------------
-8-
<PAGE> 9
PIDWELL FAMILY LIVING TRUST
DATED 6/25/87
By:/s/ David W. Pidwell
------------------------------------------
Name: David W. Pidwell
----------------------------------------
(print)
Title: Trustee
---------------------------------------
REES / SOURCE VENTURES, LIMITED
PARTNERSHIP #9
By:/s/Kenneth R. Rees
------------------------------------------
Name: Kenneth R. Rees
----------------------------------------
(print)
Title: President
---------------------------------------
ROBERT F. KIBBLE, TRUSTEE FOR THE
ROBERT F. KIBBLE LIVING TRUST, DATED
DECEMBER 28, 1990
By:/s/ Robert F. Kibble
------------------------------------------
Name: Robert F. Kibble
----------------------------------------
(print)
Title:
---------------------------------------
STF II, L.P.
c/o IndoSuez Ventures
By:/s/ David E. Gold
------------------------------------------
Name: David E. Gold
----------------------------------------
(print)
Title: Investment Manager
---------------------------------------
-9-
<PAGE> 10
VLG INVESTMENTS 1995
By:/s/ Joshua Pickus
------------------------------------------
Name: Joshua Pickus
----------------------------------------
(print)
Title: Partner
---------------------------------------
VLG INVESTMENTS 1996
By:/s/ Joshua Pickus
------------------------------------------
Name: Joshua Pickus
----------------------------------------
(print)
Title: Partner
---------------------------------------
VLG RETIREMENT SAVINGS
PLAN TRUST ACCOUNT FBO MICHAEL W.
HALL
By:/s/ Jon C. Richards
------------------------------------------
Name: Jon C. Richards
----------------------------------------
(print)
Title: Trustee
---------------------------------------
WOODSIDE FUND III, L.P.
By: Woodside Partners III, L.P.,
its General Partner
Name:/s/ Robert E. Larson
----------------------------------------
(print)
Title: General Partner
---------------------------------------
-10-
<PAGE> 11
/s/ Michael Au
---------------------------------------------
Michael Au
/s/ Richard W. Dunn
---------------------------------------------
Richard W. Dunn
/s/ Lew Epstein
---------------------------------------------
Lew Epstein
/s/ Robert G. Pearson
---------------------------------------------
Robert G. Pearson
/s/ Kalevi Puonti
---------------------------------------------
Kalevi Puonti
/s/ Edmund S. Ruffin, Jr.
---------------------------------------------
Edmund S. Ruffin, Jr.
FOUNDERS:
/s/ Jeffrey W. Dunn
---------------------------------------------
Jeffrey W. Dunn
/s/ John Burness
---------------------------------------------
John Burness
/s/ Nancy E. Bush
---------------------------------------------
Nancy E. Bush
/s/ John J. Carvello
---------------------------------------------
John J. Caravello
/s/ Greg Milliken
---------------------------------------------
Greg Milliken
/s/ Ralph Nichols
---------------------------------------------
Ralph Nochols
-11-
<PAGE> 12
EXHIBIT A
<TABLE>
<CAPTION>
FOUNDERS: SERIES A HOLDERS
<S> <C>
Jeffrey W. Dunn Jos C. Henkens
c/o AccelGraphics, Inc. c/o Advanced Technology Ventures IV
1942 Zanker Road 2884 Sand Hill Road, Suite 100
San Jose, CA 95112-9704 Menlo Park, CA 94025
Telephone: 408/441-1556 Telephone: (415) 321-8601
FAX: 408/467-5097 FAX: (415) 321-0934
John Burness AVI Capital, L.P.
c/o AccelGraphics, Inc. c/o AVI Capital Management, L.P.
1942 Zanker Road One First Street, Suite 12
San Jose, CA 95112-9704 Los Altos, CA 94022
Telephone: 408/441-1556 Telephone: (415) 949-9855
FAX: 408/467-5097 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner
Nancy E. Bush AVI Partners Growth Fund
c/o AccelGraphics, Inc. c/o AVI Management Partners III, L.P.
1942 Zanker Road One First Street, Suite 12
San Jose, CA 95112-9704 Los Altos, CA 94022
Telephone: 408/441-1556 Telephone: (415) 949-9855
FAX: 408/467-5097 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner
John J. Caravello Associated Venture Investors III, L.P.
c/o AccelGraphics, Inc. c/o AVI Management Partners III, L.P.
1942 Zanker Road One First Street, Suite 12
San Jose, CA 95112-9704 Los Altos, CA 94022
Telephone: 408/441-1556 Telephone: (415) 949-9855
FAX: 408/467-5097 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner
Greg Milliken AVI Silicon Valley Partners, L.P.
c/o AccelGraphics, Inc. c/o AVI Management Partners III, L.P.
1942 Zanker Road One First Street, Suite 12
San Jose, CA 95112-9704 Los Altos, CA 94022
Telephone: 408/441-1556 Telephone: (415) 949-9855
FAX: 408/467-5097 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner
Ralph Nichols Robert F. Kibble, Trustee for the Robert F.
c/o AccelGraphics, Inc. Kibble Living Trust, Dated December 28, 1990
1942 Zanker Road 31 Eugenia Lane
San Jose, CA 95112-9704 Woodside, CA 94062
Telephone: 408/441-1556 Telephone: (415) 365-6061
FAX: 408/467-5097 FAX: (415) 361-8783
Attn: Robert F. Kibble
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
SERIES A HOLDERS (CONT.):
<S> <C>
Kubota Corporation Rees/Source Ventures, Limited Partnership #9
2372A Qume Drive 4133 Mohr Ave., Suite A
SAn Jose, CA 95131 Pleasanton, CA 94566
Telephone: (408) 474-0216 Telephone: (510) 462-0326
FAX: (408) 474-0207 FAX: (510) 462-4398
Attn: Keizo Yamada Attn: Robert Reese
STF II, L.P. VLG Investments 1995
c/o IndoSuez Ventures 2800 Sand Hill Road
2180 Sand Hill Road, Suite 450 Menlo Park, CA 94025
Menlo Park, CA 94025 Telephone: (415) 854-4488
Telephone: (415) 854-0587 FAX: (415) 854-1121
FAX: (415) 323-5561 Attn: Joshua Pickus
Attn: David E. Gold
VLG Retirement Savings Plan Trust Woodside Fund III, L.P.
Account FBO Michael W. Hall c/o Woodside Partners III, L.P.
Venture Law Group 850 Woodside Drive
2800 Sand Hill Road Woodside, CA 94062
Menlo Park, CA 94025 Telephone: (415) 368-5545
Telephone: (415) 854-4488 FAX: (415) 368-2416
FAX: (415) 854-1121 Attn: Robert E. Larson
SERIES B HOLDERS
Advanced Technology Ventures IV Asset Management
2884 Sand Hill Road, Suite 100 2275 East Bayshore Rd., Suite 150
Menlo Park, CA 94025 Palo Alto, CA 94303
Attn: Jos Henkens Telephone: (415) 494-7400
FAX: (415) 856-1826
Associated Venture Investors III, L.P. AVI Capital, L.P.
c/o AVI Management Partners III, L.P. c/o AVI Management Partners
One First Street, Suite 12 One First Street, Suite 12
Los Altos, CA 94022 Los Altos, CA 94022
Telephone: (415) 949-9855 Telephone: (415) 949-9855
FAX: (415) 949-8510 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner Attn: Peter L. Wolken, General Partner
AVI Partners Growth Fund AVI Silicon Valley Partners, L.P.
c/o AVI Management Partners III, L.P. c/o AVI Management Partners III, L.P.
One First Street, Suite 12 One First Street, Suite 12
Los Altos, CA 94022 Los Altos, CA 94022
Telephone: (415) 949-9855 Telephone: (415) 949-9855
FAX: (415) 949-8510 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner Attn: Peter L. Wolken, General Partner
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C>
Robert F. Kibble Trust Kubota Corporation
31 Eugenia Lane 2372A Qume Drive
Woodside, CA 94062 San Jose, CA 95131
Telephone: (415) 365-6061 Telephone: (408) 474-0216
FAX: (415) 361-8783 FAX: (408) 474-0207
Attn: Robert F. Kibble Attn: Keizo Yamada
Rees/Source Ventures, Limited Partnership #9 STF II, L.P.
4133 Mohr Ave., Suite A c/o IndoSuez Ventures
Pleasanton, CA 94566 2180 Sand Hill Road, Suite 450
Telephone: (510) 462-0326 Menlo Park, CA 94025
FAX: (510) 462-4398 Telephone: (415) 854-0587
Attn: Robert Reese FAX: (415) 323-5561
Attn: David E. Gold
VLG Retirement Savings Plan Trust Woodside Fund III, L.P.
Account FBO Michael W. Hall c/o Woodside Partners III, L.P.
Venture Law Group 850 Woodside Drive
2800 Sand Hill Road Woodside, CA 94062
Menlo Park, CA 94025 Telephone: (415) 368-5545
Telephone: (415) 854-4488 FAX: (415) 368-2416
FAX: (415) 854-1121 Attn: Robert E. Larson
Michael Au Richard W. Dunn
Moore Capital 27 River Road
1251 Avenue of the Americas Weston, CT 06883
New York, NY 10020
Lew Epstein Robert G. Pearson
12759 Saratoga Woods Circle c/o Pearson Strategic Consulting
Saratoga, CA 95070 275 Apricot Lane
Mountain View, CA 94040
Pidwell Family Living Trust dated 6/25/87 Kalevi Puonti
c/o David W. Pidwell Rue Du Pommier 12
20628 Vickery Lane 2000 Neuchatel
Saratoga, CA 95070
Telephone: (408) 867-6004
FAX: (408) 867-5049
Edmund S. Ruffin, Jr. VLG Investments 1996
c/o Venture Law Group c/o Venture Law Group
2800 Sand Hill Road 2800 Sand Hill Road
Menlo Park, CA 94025 Menlo Park, CA 94025
Telephone: (415) 854-4488 Telephone: (415) 854-4488
FAX: (415) 854-1121 FAX: (415)854-1121
Attn: Joshua Pickus
</TABLE>
<PAGE> 1
EXHIBIT 10.1
ACCELGRAPHICS, INC.
1995 STOCK PLAN
(Amended and Restated January 31, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means AccelGraphics, Inc., a California
corporation.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a consultant or
from a consultant to an Employee will not constitute a termination of
employment.
<PAGE> 2
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee to a Director by the Company shall not be
sufficient to constitute "employment" of such Director by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(l) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such exchange or system for the last market trading day
prior to the time of determination) as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(m) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "Named Executive" shall mean any individual who, on the
last day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief executive officer). Such officer
status shall be determined pursuant to the executive compensation disclosure
rules under the Exchange Act.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act.
(q) "Option" means a stock option granted pursuant to the
Plan.
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<PAGE> 3
(r) "Optioned Stock" means the Common Stock subject to an
Option or a Stock Purchase Right.
(s) "Optionee" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
(t) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1995 Stock Plan.
(v) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 12 below.
(w) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act as the same may be amended from time to time, or any successor
provision.
(x) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14 below.
(y) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 12 below.
(z) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 3,300,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3, and by the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), grants under the Plan may (but need not)
be made by different administrative bodies with respect to Directors, Officers
who are not directors and Employees who are neither Directors nor Officers.
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<PAGE> 4
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options to Employees or Consultants who are
also Officers or Directors of the Company, grants under the Plan shall be made
by (A) the Board, if the Board may make grants under the Plan in compliance with
Rule 16b-3 and Section 162(m) of the Code as it applies so as to qualify grants
of Options to Named Executives as performance-based compensation, or (B) a
Committee designated by the Board to make grants under the Plan, which Committee
shall be constituted in such a manner as to permit grants under the Plan to
comply with Rule 16b-3, to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and otherwise so
as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons.
With respect to grants of Options to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. If a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies (however caused)
and remove all members of a Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by Rule 16b-3
and to the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(m) of the Plan;
(ii) to select the Employees and Consultants to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in its sole
discretion);
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<PAGE> 5
(vii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if he is otherwise eligible, be granted additional
Options or Stock Purchase Rights.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 20 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
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<PAGE> 6
8. Limitation on Grants to Employees. Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be subject to options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 500,000.
9. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(a) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(b) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(a) granted to a person who, at the time of
the grant of such Option, is a Named Executive of the Company, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of the grant.
(b) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other
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<PAGE> 7
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 14 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the
event of termination of an Optionee's Continuous Status as an Employee or a
Consultant with the Company, such Optionee may, but only within sixty (60) days
of such termination (or such other period of time as is determined by the Board,
with such determination in the case of an Incentive Stock Option being made at
the time of grant of the Option and not exceeding three (3) months after the
date of such termination but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his Option
to the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
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<PAGE> 8
(c) Disability of Optionee.
(i) Notwithstanding the provisions of Section 10(b)
above, in the event of termination of an Optionee's Continuous Status as an
Employee or a Consultant as a result of his or her total and permanent
disability (within the meaning of Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee as a result of a
disability which does not fall within the meaning of total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. However, to the extent that such
Optionee fails to exercise an Option which is an Incentive Stock Option ("ISO")
(within the meaning of Section 422 of the Code) within three (3) months of the
date of termination, the Option will not qualify for ISO treatment under the
Code. To the extent that Optionee was not entitled to exercise the Option at the
date of termination, or if Optionee does not exercise such Option to the extent
so entitled within six months (6) from the date of termination, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
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<PAGE> 9
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator. Shares purchased pursuant
to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability. The purchase price for Shares repurchased pursuant to the Restricted
Stock Purchase Agreement shall be the higher of the original price paid by the
purchaser or the then current Fair Market Value of the Shares as determined by
the Board of Directors of the Company and may be paid by cancellation of any
indebtedness of the purchaser to the Company.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
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<PAGE> 10
13. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option, or the Shares to be issued in connection with the Stock Purchase Right,
if any, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made; and
(c) all elections shall be subject to the consent or
disapproval of the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
14. Adjustments Upon Changes in Capitalization; Corporate Transaction.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the maximum number of shares of Common Stock for which options
may be granted to any employee under Section 8 of the Plan, as well as the price
per share of Common Stock covered by each such outstanding Option or Stock
Purchase Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as
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<PAGE> 11
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or Stock Purchase
Right.
(b) Corporate Transactions. In the event of the
proposed dissolution or liquidation of the Company, the Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator. The Administrator may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Administrator and give each Optionee the right to exercise
his or her Option as to all or any part of the Optioned Stock, including Shares
as to which the Option would not otherwise be exercisable. In the event of a
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, each outstanding Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option, the Optionee shall have the right to exercise the Option as to all of
the Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable. If an Option becomes fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee that the Option shall be exercisable for a period of fifteen
(15) days from the date of such notice, and the Option will terminate upon the
expiration of such period.
15. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Sections 162(m) and 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain shareholder approval of
any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
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<PAGE> 12
17. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
20. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
21. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquired Shares pursuant to the
Plan, during the period such Optionee or purchaser has one or more Options or
Stock Purchase Rights outstanding, and, in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares, financial statements at least annually. The Company shall not be
required to provide such information if the issuance of Options or Stock
Purchase Rights under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information.
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<PAGE> 13
ACCELGRAPHICS, INC.
1995 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
Optionee's Name and Address:
((Name))
((Address))
You have been granted an option to purchase Common Stock of
AccelGraphics, Inc. (the "Company") as follows:
Date of Grant: ((Date of Grant))
Option Price Per Share: $((Price per share))
Total Number of Shares Granted: ((No Share))
Total Price of Shares Granted: $((Share Price))
Type of Option: Incentive Stock Option
Term/Expiration Date: ((Exp Date))
Vesting Commencement Date ((VCD))
Vesting Schedule:
1/8th of the Shares Granted
shall vest on the six (6) month
anniversary of the Vesting
Commencement Date; and 1/48th
of the original number of
Shares Granted shall vest on
each monthly anniversary of the
Vesting Commencement Date
thereafter while Optionee
remains an employee of or
consultant to the Company.
<PAGE> 14
Termination Period:
Option may be exercised for 60 days after termination of employment or
consulting relationship except as set out in Sections 7 and 8 of the Stock
Option Agreement (but in no event later than the Expiration Date).
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1995 Stock Plan and the Stock Option
Agreement, all of which are attached and made a part of this document.
OPTIONEE: ACCELGRAPHICS, INC.
___________________________________ By: ____________________________
((Name))
Name: __________________________
Title: _________________________
Address (if different from above): Address:
___________________________________ 1942 Zanker Road
San Jose, CA 95112-9704
___________________________________
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<PAGE> 15
ACCELGRAPHICS, INC.
1995 STOCK PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. AccelGraphics, Inc., a California corporation
(the "Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the AccelGraphics, Inc. 1995 Stock
Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its
term in accordance with the Exercise Schedule set out in the Notice of Grant and
with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of
a share.
(b) In the event of Optionee's death, disability or
other termination of employment, the exercisability
of the Option is governed by Sections 6, 7 and 8
below, subject to the limitation contained in
subsection 2(i)(c).
(c) In no event may this Option be exercised after the
date of expiration of the term of this Option as
set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price.
<PAGE> 16
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.
4. Method of Payment. Payment of the Exercise Price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
i. cash; or
ii. check; or
iii. surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
iv. delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled
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<PAGE> 17
to exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
7. Disability of Optionee.
(a) Notwithstanding the provisions of Section 6 above, in the event of
termination of an Optionee's consulting relationship or Continuous Status as an
Employee as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(b) In the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of a disability
which does not fall within the meaning of total and permanent disability (as set
forth in Section 22(e)(3) of the Code), Optionee may, but only within six (6)
months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. However, to the extent that such Optionee fails
to exercise an Option which is an Incentive Stock Option ("ISO") (within the
meaning of Section 422 of the Code) within three (3) months of the date of
termination, the Option will not qualify for ISO treatment under the Code. To
the extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within six months (6) from the date of termination, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the
Option may be exercised at any time within six (6) months following the date of
death (but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
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<PAGE> 18
11. Tax Consequences. Set forth below is a brief summary as of the
date of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
12. Taxation Upon Exercise of Option. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option by one or some combination
of the following methods: (i) by cash payment, or (ii) out of Optionee's current
compensation, or (iii) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares which (a) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a fair market value on the date of
surrender equal to or greater than Optionee's marginal tax rate times the
ordinary income recognized, (iv) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a fair market value equal to the amount required to be withheld. For this
purpose, the fair market value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(1) the election must be made on or prior to the applicable Tax
Date;
(2) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(3) all elections shall be subject to the consent or disapproval
of the Administrator;
-4-
<PAGE> 19
(4) if the Optionee is an Insider, the election must comply with
the applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(i) Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability or California income tax
liability upon the exercise of the Option, although the excess, if any, of the
fair market value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.
(ii) Exercise of NSO. If this Option does not qualify as an
ISO, there may be a regular federal income tax liability and a California income
tax liability upon the exercise of the Option. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price. If Optionee is an employee, the Company will
be required to withhold from Optionee's compensation or collect from Optionee
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares
are held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the fair market value of the Shares on the date of exercise, or
(2) the sale price of the Shares.
(iv) Notice of Disqualifying Disposition of ISO Shares. If
the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
AccelGraphics, Inc.
a California corporation
By:_________________________________
Title:______________________________
-5-
<PAGE> 20
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option.
Dated: ____________________________ _______________________________
(Signature)
_______________________________
(Printed Name)
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<PAGE> 21
EXHIBIT A
1995 STOCK PLAN
EXERCISE NOTICE
AccelGraphics, Inc.
1942 Zanker Road
San Jose, CA 95112-9704
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_______________ shares of the Common Stock (the "Shares") of AccelGraphics, Inc.
(the "Company") under and pursuant to the Company's 1995 Stock Plan, as amended
(the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
____________________________ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the "1933 Act"), and, notwithstanding any other provision
of the Option Agreement to the contrary, the exercise of any rights to purchase
any Shares is expressly conditioned upon compliance with the 1933 Act, all
applicable state securities laws and all applicable requirements of any stock
exchange or over the counter market on which the Company's Common Stock may be
listed or traded at the time of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares have not been registered under the 1933 Act and therefore cannot be
resold and must be held indefinitely unless they are registered under the 1933
Act or unless an exemption from such registration is available and that the
certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee.
Specifically, Optionee has been advised that Rule 144 promulgated under the 1933
Act, which permits certain resales of unregistered securities, is not presently
available with respect to the Shares and, in any event requires that the Shares
be paid for and then be held for at least two years (and in some cases three
years) before they may be resold under Rule 144.
<PAGE> 22
5. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.
6. Company's Right of First Refusal. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
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<PAGE> 23
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the 1933 Act.
7. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
-3-
<PAGE> 24
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD
BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE
NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES,
A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be restricted
by Section 260.141.11 of the Rules of the California Corporations Commissioner,
a copy of which is attached to Exhibit B, the Investment Representation
Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
9. Market Standoff Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
one year) from the effective date of such registration as may be requested by
the Company or such managing underwriters; provided, however, that the Optionee
need not so agree unless a majority of the Company's officers and directors and
a majority of the holders of at least 5% of the Company's outstanding securities
also agree to be similarly bound.
10. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
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<PAGE> 25
11. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
13. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
14. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: ACCELGRAPHICS, INC.
By: ___________________________
___________________________
(Signature) Title: ________________________
Address: Address:
___________________________ 1942 Zanker Road
___________________________ San Jose, CA 95112-9704
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<PAGE> 26
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER:
SELLER :
COMPANY : ACCELGRAPHICS, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that, in
the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In addition,
I understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
<PAGE> 27
(d) I am familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of issuance of the Securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge
and agree to the restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at
the time of issuance of the Securities, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public information
about the Company, (2) the resale occurring not less than two years after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
(f) I understand that the certificate evidencing the Securities
may be imprinted with a legend which prohibits the transfer of the Securities
without the consent of the Commissioner of Corporations of California. I have
read the applicable Commissioner's Rules with respect to such restriction, a
copy of which is attached.
Date: _____________________________ Signature of Purchaser:
_______________________________
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<PAGE> 28
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer.
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the
issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such securities
is not in violation of any securities law of the foreign state, territory or
country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or Subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or Subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OR CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE> 29
ACCELGRAPHICS, INC.
1995 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement ("Agreement") is made as of
______________, 199__, by and between AccelGraphics, Inc., a California
corporation (the "Company"), and ((Purchaser)) ("Purchaser") pursuant to the
Company's 1995 Stock Plan.
1. Sale of Stock. Subject to the terms and conditions hereof, on the
Closing Date the Company will issue and sell to Purchaser, and Purchaser agrees
to purchase from the Company, ((Shares)) shares of the Company's Common Stock
(the "Shares") at a purchase price of $((Price)) per Share for a total purchase
price of $((TotalPrice)). The term "Shares" refers to the purchased Shares and
all securities received in replacement of Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Closing; Security Interest.
(a) The closing of the purchase and sale of the Shares hereunder
(the "Closing") shall be held at the principal office of the Company
simultaneously with the execution of this Agreement by the parties or on such
other date as they agree (the "Closing Date").
(b) At the Closing, the Company will deliver to Purchaser a
certificate representing the Shares to be purchased by him (which shall be
issued in Purchaser's name) against payment of the purchase price therefor. The
purchase price for the Shares shall be paid to the Company by delivery to the
Company of Purchaser's full recourse promissory note (the "Note") for the
balance of the purchase price, if any, in the form attached hereto as EXHIBIT A.
(c) With respect to the Note, the parties agree to the following:
(1) The Note shall become payable in full upon the voluntary
or involuntary termination or cessation of employment or association with the
Company of Purchaser with the Company, for any reason, with or without cause
(including death or disability).
(2) Purchaser shall deliver to the Secretary of the Company,
or his designee (hereinafter referred to as the "Pledge Holder"), all
certificates representing the Shares, together with (i) an Assignment Separate
from Certificate in the form attached hereto EXHIBIT B executed by Purchaser and
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of said Shares to the Company if, as and when
required under this Section 2(c) or under any other provision of this Agreement
including, without limitation,
<PAGE> 30
Section 3. In addition, Purchaser's spouse, if any, shall execute and deliver to
the Company the Consent of Spouse attached hereto as EXHIBIT C.
(3) As security for the payment of the Note and any renewal,
extension or modification thereof, Purchaser hereby grants to the Company a
security interest in and pledges with and delivers to the Company Purchaser's
Shares (sometimes referred to herein as the "Collateral").
In the event that Purchaser prepays all or a portion of
the Note, in accordance with the provisions thereof, Purchaser intends, unless
written notice to the contrary is delivered to the Pledge Holder, that the
Shares represented by the portion of the Note so repaid, including annual
interest thereon, shall continue to be so held by the Pledge Holder, to serve as
independent collateral for the outstanding portion of the Note for the purpose
of commencing the holding period set forth in Rule 144(d) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
(4) In the event of any foreclosure of the security
interest, the Company may sell the Shares at a private sale or may repurchase
the Shares itself. The parties agree that, prior to the establishment of a
public market for the Shares of the Company, the securities laws affecting sale
of the Shares make a public sale of the Shares commercially unreasonable. The
parties further agree that the repurchasing of such Shares by the Company, or by
any person to whom the Company may have assigned its rights hereunder, is
commercially reasonable if made at a price determined by the Board of Directors
in its discretion, fairly exercised, representing what would be the fair market
value of the Shares reduced by any limitation on transferability, whether due to
the size of the block of Shares or the restrictions of applicable securities
laws.
(5) In the event of default in payment when due of any
indebtedness under Purchaser's Note, the Company may elect then, or at any time
thereafter, to exercise all rights available to a Secured Party under the
California Commercial Code including the right to sell the Collateral at a
private or public sale or repurchase the Shares as provided above. The proceeds
of any sale shall be applied in the following order:
(i) To the extent necessary, proceeds shall be used
to pay all reasonable expenses of the Company in
enforcing this Agreement, including, without
limitation, reasonable attorney's fees and legal
expenses incurred by the Company.
(ii) To the extent necessary, proceeds shall be used
to satisfy any remaining indebtedness under
Purchaser's Note.
(iii) Any remaining proceeds shall be delivered to
Purchaser.
(6) Upon full payment by Purchaser of all amounts due on the
Note, Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to
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<PAGE> 31
Purchaser, and Pledge Holder shall thereupon be discharged of all further
obligations hereunder; provided, however, that Pledge Holder shall nevertheless
retain said Shares as escrow agent if at the time of full payment by Purchaser
said Shares are still subject to restrictions under Section 3 hereof.
3. Limitations on Transfer.
In addition to any other limitation on transfer created by
applicable securities laws, Purchaser shall not assign, encumber or dispose of
any interest in the Shares while the Shares are subject to the Company's
repurchase option, except as provided in Section 3(h) below. After any Shares
have been released from such repurchase option, Purchaser shall not assign,
encumber or dispose of any interest in such Shares except in compliance with
Sections 3(b) and 3(c) below and applicable securities laws:
(a) Repurchase Option. In the event of the voluntary or
involuntary termination of employment or association with the Company of
Purchaser with the Company for any reason, with or without cause (including
death or disability), the Company shall, upon the date of such termination, have
an irrevocable, exclusive option for a period of 60 days from such date to
repurchase all or any portion of the Shares held by Purchaser as of such date
which have not yet been released from the Company's repurchase option at the
original purchase price per Share specified in Section 1. The option shall be
exercised by the Company by written notice to Purchaser or his executor and, at
the Company's option, (i) by delivery to the Purchaser or his executor with such
notice of a check in the amount of the purchase price for the Shares being
purchased, or (ii) in the event the Purchaser is indebted to the Company, by
cancellation by the Company of an amount of such indebtedness equal to the
purchase price for the Shares being repurchased, or (iii) by a combination of
(i) and (ii) so that the combined payment and cancellation of indebtedness
equals such purchase price. Upon delivery of such notice and payment of the
purchase price in any of the ways described above, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interest therein or related thereto, and the Company shall have the right to
transfer to its own name the number of Shares being repurchased by the Company,
without further action by Purchaser. One hundred percent (100%) of the Shares
purchased by Purchaser shall initially be subject to the Company's repurchase
option set forth above. Thereafter, the remaining Shares held by Purchaser shall
be released from the Company's repurchase option under this Section 3(a) as
follows (provided in each case that Purchaser's employment or by association
with the Company has not been terminated prior to the date of any such release):
1/8th of the total number of Shares shall be released from the repurchase option
on the six-month anniversary of the Vesting Commencement Date (as set forth on
the signature page of this Agreement), and 1/48th of the total number of Shares
shall be released from the repurchase option on each monthly anniversary of the
Vesting Commencement Date thereafter until all Shares are released from the
repurchase option. Fractional shares shall be rounded to the nearest whole
share.
(b) Right of First Refusal. In the event, at any time after the
date of this Agreement, the Purchaser or his transferee desires to sell or
transfer in any manner the Shares as to which the option provided in Section
3(a) above is not applicable or has not been exercised, he
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<PAGE> 32
shall first offer such Shares for sale to the Company at the same price, and
upon the same terms (or terms as similar as reasonably possible) upon which he
is proposing or is to dispose of said Shares. Said right of first refusal shall
be provided to the Company for a period of thirty (30) days following receipt by
the Company of written notice by the Purchaser of the terms and conditions of
said proposed sale or transfer and the name, address and phone number of each
proposed buyer or transferee. If the Company desires to exercise such right of
first refusal, it shall notify Purchaser in writing within such thirty day
period. In the event the Shares are not disposed of on such terms within thirty
(30) days following lapse of the period of the right of first refusal provided
to the Company or if the Purchaser proposes to change the price or other terms
to make them more favorable to the buyer, they shall once again be subject to
the right of first refusal herein provided.
(c) Involuntary Transfer. In the event, at any time after the date
of this Agreement, of any transfer by operation of law or other involuntary
transfer (including death or divorce) of all or a portion of the Shares by the
record holder thereof, the Company shall have an option to purchase all of the
Shares transferred. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to
purchase such Shares shall be provided to the Company for a period of thirty
(30) days following receipt by the Company of written notice by the person
acquiring the Shares.
(d) Price for Involuntary Transfer. With respect to any stock to
be transferred pursuant to Section 3(c), the price per Share shall be the higher
of: (i) the original purchase price of the Shares; or (ii) a price set by the
Board of Directors of the Company that will reflect the current value of the
stock in terms of present earnings and future prospects of the Company and shall
not be less than the book value of the stock at that time. The Company shall
notify Purchaser or his executor of the price so determined within thirty (30)
days after receipt by it of written notice of the transfer or proposed transfer
of Shares.
(e) Assignment. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any shareholder or
shareholders of the Company or other persons or organizations.
(f) Restrictions Binding on Transferees. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Company's option to repurchase under Section 3 and the Company's rights under
Section 2. Any sale or transfer of the Company's Shares shall be void unless the
provisions of this Agreement are met.
(g) Termination of Refusal Right. The right of first refusal
granted the Company by Section 3(b) above shall terminate at such time as a
public market exists for the Company's capital stock (or any other stock issued
to purchasers in exchange for the Shares purchased under this Agreement). For
the purpose of this Agreement, a "Public Market" shall be deemed to exist if (i)
such stock is listed on a national securities exchange (as that term is used in
the Securities Exchange Act of 1934) or (ii) such stock is traded on the
over-the-counter market and prices are published daily on business days in a
recognized financial journal.
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<PAGE> 33
Upon termination of the right of first refusal imposed by this
Agreement and the expiration or exercise of the Company's repurchase option
described in Section 3(a) above, a new certificate or certificates representing
the Shares not repurchased shall be issued, on request, without the legend
referred to in Section 6(b) herein and delivered to Purchaser.
(h) Exempt Transfers. The restrictions on transfer of this Section
3 shall not apply to a transfer to Purchaser's ancestors or descendants or
spouse or to a trustee for their benefit, provided that such transferee shall
agree in writing to take such Shares subject to all the terms of this Agreement,
including restrictions on further transfer.
4. Escrow. For purposes of facilitating the enforcement of the
provisions of Section 3 above, Purchaser agrees, immediately upon receipt of the
certificate(s) for his Shares, to deliver such certificate(s), together with an
Assignment Separate from Certificate in the form attached hereto as EXHIBIT B
executed by Purchaser and by Purchaser's spouse (if required for transfer), in
blank, to the Secretary of the Company, or his designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms hereof. Purchaser hereby acknowledges that the
Secretary of the Company, or his designee, is so appointed as the escrow holder
with the foregoing authorities as a material inducement to make this Agreement
and that said appointment is coupled with an interest and is accordingly
irrevocable. Purchaser agrees that said escrow holder shall not be liable to any
party hereof (or to any other party) for any actions or omissions unless such
escrow holder is grossly negligent relative thereto. The escrow holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or his designee, resigns as escrow holder for any or no reason, the
Board of Directors of the Company shall have the power to appoint a successor to
serve as escrow holder pursuant to the terms of this Agreement.
5. Investment Representations.
In connection with the purchase of the Shares, Purchaser
represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his own account only
and not with a view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
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<PAGE> 34
(c) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and
701, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the securities exempt under Rule
701 may be resold by the Purchaser ninety (90) days thereafter, subject to the
satisfaction of certain of the conditions specified by Rule 144, including,
among other things: (1) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and (2) in the case
of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
If the Company does not qualify under Rule 701 at the time of purchase,
then the securities may be resold by the Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and (3) in the case of an affiliate, or of a non-affiliate who has held
the securities less than three years, the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934) and
the amount of securities being sold during any three month period not exceeding
the specified limitations stated therein, if applicable. PURCHASER UNDERSTANDS
THAT PAYMENT BY NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER RULE 144 UNLESS IT
IS SECURED BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she
wishes to sell the securities there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144 or
701, and that, in such event, Purchaser would be precluded from selling the
securities under Rule 144 or 701 even if the two-year minimum holding period had
been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that,
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<PAGE> 35
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the SEC has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rule 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
6. Legends.
The certificate or certificates representing the Shares shall bear
the following legends (as well as any legends required by applicable state and
federal corporate and securities laws):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY."
7. No Employment Rights.
Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Company, or a parent or subsidiary of the Company, to
terminate Purchaser's employment or association with the Company, for any
reason, with or without cause.
8. Section 83(b) Election.
Purchaser understands that Section 83(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), taxes as ordinary income the difference
between the amount paid for the Shares and the fair market value of the Shares
as of the date any restrictions on the Shares lapse. In this context,
"restriction" means the right of the Company to buy back the Shares pursuant to
the repurchase option set forth in Section 3(a) of this Agreement. Purchaser
understands that Purchaser may elect to be taxed at the time the Shares are
purchased, rather than when and as the repurchase option expires, by filing an
election under Section 83(b) of the Code with the Internal Revenue Service
within 30 days from the date of purchase. Even if the fair market value of the
Shares at the time of the execution of this Agreement equals the amount paid for
the Shares, the election must be made to avoid tax treatment under Section 83(a)
in the future. The form for
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<PAGE> 36
making Purchaser's election is attached hereto. Purchaser understands that his
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his federal income tax return
for the calendar year in which the date of this Agreement falls.
9. Standoff Agreement. In connection with the initial public offering
of the Company's securities and upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, Purchaser agrees
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Shares (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
year) from the effective date of such registration as may be requested by the
Company or such managing underwriters; provided, however, that the Purchaser
need not so agree unless a majority of the Company's officers and directors and
a majority of the holders of at least 5% of the Company's outstanding securities
also agree to be similarly bound.
10. Miscellaneous.
(a) This Agreement may be amended by written agreement between the
Company and Purchaser.
(b) Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telecopy or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed, if to the Company, at its principal place of business,
attention the President, and if to Purchaser, at Purchaser's address as shown on
the stock records of the Company.
(c) The rights and benefits of this Agreement shall inure to the
benefit of, and be enforceable by the Company's successors and assigns. The
rights and obligations of Purchaser under this Agreement may only be assigned
with the prior written consent of the Company.
(d) Both parties agree to execute any additional documents
necessary to carry out the purposes of this Agreement.
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<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
ACCELGRAPHICS, INC.
By: ___________________________
Title: ________________________
PURCHASER:
((Purchaser))
_______________________________
(Signature)
Address:
((Address1))
((Address2))
Vesting Commencement
Date: ((VCD))
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<PAGE> 38
EXHIBIT A
PROMISSORY NOTE
$____________ _______________, California
_______________, 19__
At the times hereinafter stated, for value received, the undersigned promises to
pay AccelGraphics, Inc., a California corporation (the "Company"), or order, at
its principal office the principal sum of $____________ with interest from the
date hereof at a rate of __% per annum, compounded semi-annually, on the unpaid
balance of said principal sum. Said principal and interest shall be due and
payable on ______________, 19__.
If the undersigned's employment by or association with the Company is terminated
prior to payment in full of this Note, this Note shall be immediately due and
payable.
Principal and interest are payable in lawful money of the United States of
America. AT ANY TIME, THE PRIVILEGE IS RESERVED TO PAY MORE THAN THE SUM DUE.
Should suit be commenced to collect this Note or any portion thereof, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of non-payment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares of
Common Stock of the Company and is subject to the terms of a Restricted Stock
Purchase Agreement between the undersigned and the Company of even date
herewith.
__________________________
__________________________
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<PAGE> 39
PROMISSORY NOTE
$((Total Price)) San Jose, California
____________________ , 1996
At the times hereinafter stated, for value received, the undersigned
promises to pay to AccelGraphics, Inc., a California corporation (the
"Company"), or order, at its principal office the principal sum of
$((TotalPrice)) with interest from the date hereof at a rate of ((Interest))%
per annum, compounded semi-annually, on the unpaid balance of said principal
sum. Said principal and interest shall be due and payable on ((NoteDue)).
If the undersigned's employment by or association with the Company is
terminated prior to payment in full of this Note, this Note shall be immediately
due and payable.
Principal and interest are payable in lawful money of the United States
of America. AT ANY TIME, THE PRIVILEGE IS RESERVED TO PAY MORE THAN THE SUM DUE.
Should suit be commenced to collect this Note or any portion thereof,
such sum as the Court may deem reasonable shall be added hereto as attorneys'
fees. The makers and endorsers have severally waived presentment for payment,
protest, notice of protest, and notice of non-payment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a
Restricted Stock Purchase Agreement between the undersigned and the Company of
even date herewith.
__________________________
((Purchaser))
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<PAGE> 40
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement between the undersigned ("Purchaser") and AccelGraphics, Inc.
dated _____________, 19__ (the "Agreement"), Purchaser hereby sells, assigns and
transfers unto _________________________________________________________________
(________) shares of the Common Stock of AccelGraphics, Inc. standing in
Purchaser's name on the books of said corporation represented by Certificate
No. ___ herewith and does hereby irrevocably constitute and appoint
_______________________ _______________________________ to transfer said stock
on the books of the within-named corporation with full power of substitution in
the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT
AND THE EXHIBITS THERETO.
Dated: ____________, 19__. Signature:
__________________________
__________________________
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
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<PAGE> 41
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement between the undersigned ("Purchaser") and AccelGraphics, Inc.
dated ___________, 19__ (the "Agreement"), Purchaser hereby sells, assigns and
transfers unto _______________________ (________) shares of the Common Stock of
AccelGraphics, Inc. standing in Purchaser's name on the books of said
corporation represented by Certificate No. _____ herewith and does hereby
irrevocably constitute and appoint __________________________________________ to
transfer said stock on the books of the within-named corporation with full power
of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED
BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated: ____________, 19__. Signature:
__________________________
((Purchaser))
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
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<PAGE> 42
EXHIBIT C
CONSENT OF SPOUSE
I, ________________________________, spouse of ________________, have
read and hereby approve the foregoing Agreement. In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, I hereby agree to be irrevocably bound by the Agreement and
further agree that any community property or other such interest shall be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
_______________________________
Spouse of Purchaser
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<PAGE> 43
CONSENT OF SPOUSE
I, ___________________, spouse of ((Purchaser)), have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall be similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
_______________________________
Spouse of Purchaser
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<PAGE> 44
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the Internal Revenue Code,
to include in his gross income for the current taxable year, the amount of any
compensation taxable to him in connection with his receipt of the property
described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME : TAXPAYER: ((PURCHASER))
SPOUSE: _______________
ADDRESS : ((ADDRESS1))
((ADDRESS2))
IDENTIFICATION NO.: TAXPAYER: _______________________________
SPOUSE: _________________________________
TAXABLE YEAR: 199__
2. The property with respect to which the election is made is described as
follows:
((SHARES)) shares of the Common Stock (the "Shares"), no par value, of
AccelGraphics, Inc., a California corporation.
3. The date on which the property was transferred is: _____________, 199__
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of AccelGraphics, Inc. upon
termination of taxpayer's employment, consulting, officer or director
relationship.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is: $((TOTALPRICE)).
6. The amount (if any) paid for such property: $((TOTALPRICE)).
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________, 199__ _______________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________, 199__ _______________________________
Spouse of Taxpayer
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<PAGE> 45
INFORMATION LETTER RE SECTION 83(B) ELECTION
This information is supplied to you in connection with your recent
purchase of shares of the common Stock of AccelGraphics, Inc., (the "Company")
at a purchase price equal to the current fair market value of the stock and
subject to an Agreement that gives the Company the right to repurchase the
shares under certain terms in the event that you terminate your employment or
association with the Company prior to the four-year vesting period.
Section 83 of the Internal Revenue Code of 1986, as amended (the
"Code") taxes as ordinary income the difference between the amount paid for
stock by an employee and its fair market value as of the date any restrictions
on that stock lapse. In this context, "restriction" means the right of the
Company to buy back the stock at less than its fair market value, in connection
with the termination of employment or association with the Company, which right
expires in increments until the fourth anniversary of your vesting commencement
date. Thus, for example, if the fair market value of your stock increased to
$1.00 a share on the vesting dates and in 1944 you purchased it for $0.15 a
share, you would be required to report ordinary income in such year in the
amount of $0.85 for each share of stock which had vested, even if you had not
sold the stock.
To avoid the assessment of ordinary income tax at the time the
restrictions end, there is an election that can be filed under Section 83(b) of
the Code, which is an election to include as income in the year the stock was
purchased the difference between what is paid for the stock and its then fair
market value. Even though in your case the fair market value of the stock may
equal the amount paid, the Internal Revenue Service nonetheless requires that
the election be filed in order to avoid adverse tax consequences in the future.
You should also be aware that although the Board of Directors of the Company has
determined that the current fair market value of your stock is the purchase
price, it is possible that with the benefit of hindsight, the I.R.S. could
challenge such valuation, and if it succeeded, assess the difference, if
greater, as ordinary income for the year of initial purchase.
Attached hereto is the form of Election Under Section 83(b). One
executed copy of the Section 83(b) Election Form must be filed with the Internal
Revenue Service within thirty (30) days of the purchase of the shares (which the
Company will undertake for you if timely returned), one copy will be filed with
the Franchise Tax Board (which the Company will also undertake for you if timely
returned), one executed copy is for the Company's records, and one executed copy
should be filed along with your federal income tax return for this tax year.
Also, if you are a resident of a state other than California, please consult
with your personal tax advisor as to the requirements for making similar filings
in such state.
<PAGE> 46
RECEIPT AND CONSENT
The undersigned hereby acknowledges receipt of a photocopy of
certificate number____ for shares of Common Stock of AccelGraphics, Inc. (the
"Company").
The undersigned further acknowledges receipt of a copy of Section
260.141.11 of the Rules of the Commissioner of Corporations of the State of
California, which copy is attached to the aforementioned photocopy of the
certificate.
The undersigned further acknowledges that the Secretary of the Company,
or his designee, is acting as escrow holder pursuant to the Stock Purchase
Agreement he/she has previously entered into with the Company. As escrow holder,
the Secretary of the Company, or his designee, holds the original of the
aforementioned certificate issued in the undersigned's name.
Dated: _______________, 199__
_______________________________
((Purchaser))
<PAGE> 1
EXHIBIT 10.2
ACCELGRAPHICS, INC.
1997 DIRECTORS' STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option Plan
are to attract and retain the best available personnel for service as Directors
of the Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean AccelGraphics, Inc., a California
corporation.
(e) "Continuous Status as a Director" shall mean the absence of
any interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including any officer or
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(i) "Option" shall mean a stock option granted pursuant to the
Plan. All options shall be nonstatutory stock options (i.e., options that are
not intended to qualify as incentive stock options under Section 422 of the
Code).
(j) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(k) "Optionee" shall mean an Outside Director who receives an
Option.
(l) "Outside Director" shall mean a Director who is not an
Employee.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
<PAGE> 2
(n) "Plan" shall mean this 1997 Directors' Stock Option Plan.
(o) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 200,000 Shares (the "Pool") of Common Stock. The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the
Plan shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase Shares (the "First Option") as follows: (A) with respect to
persons who are Outside Directors on the effective date of this Plan, as
determined in accordance with Section 6 hereof, 15,000 shares on such effective
date, and (B) with respect to any other person, 15,000 shares on the date on
which such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board of Directors to fill
a vacancy.
(iii) After the First Option has been granted to an Outside
Director, such Outside Director shall thereafter be automatically granted an
Option to purchase 5,000 Shares (a "Subsequent Option") on the date of each
Annual Meeting of the Company's shareholders immediately following which such
Outside Director is serving on the Board, provided that, on such date, he or she
shall have served on the Board for at least six (6) months prior to the date of
such Annual Meeting.
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<PAGE> 3
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on such date on the automatic grant date. Any further grants shall then
be deferred until such time, if any, as additional Shares become available for
grant under the Plan through action of the shareholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(1) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof;
(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the First Option,
determined in accordance with Section 8 hereof; and
(3) the First Option shall become exercisable in
installments cumulatively as to 33-1/3% of the Shares subject to the First
Option on each of the first, second and third anniversaries of the date of grant
of the Option.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof;
(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the Subsequent
Option, determined in accordance with Section 8 hereof; and
(3) the Subsequent Option shall become exercisable
as to one hundred percent (100%) of the Shares subject to the Subsequent Option
on the third anniversary of the date of grant of the Subsequent Option.
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which
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<PAGE> 4
exercise price shall be determined in accordance with Section 8(a) of the Plan;
(iii) to interpret the Plan; (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan; (v) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option previously granted hereunder; and (vi) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the President or his
or her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4(b) hereof. An Outside Director who has been granted an
Option may, if he or she is otherwise eligible, be granted an additional
Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years
from the date of grant thereof.
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<PAGE> 5
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be 100% of the
fair market value per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined
by the Board; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock in the over-the-counter market on the date of
grant, as reported in The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("Nasdaq") System) or, in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing price on such system or exchange on the date of grant
of the Option (or, in the event that the Common Stock is not traded on such
date, on the immediately preceding trading date), as reported in The Wall Street
Journal. With respect to any Options granted hereunder concurrently with the
initial effectiveness of the Plan, the fair market value shall be the Price to
Public as set forth in the final prospectus relating to such initial public
offering.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable prior to
shareholder approval of the Plan in accordance with Section 17 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be
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<PAGE> 6
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within sixty (60) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Option
be exercised after its term set forth in Section 7 has expired. To the extent
that such Outside Director was not entitled to exercise an Option at the date of
such termination, or does not exercise such Option (which he or she was entitled
to exercise) within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within six (6) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Board) from the date of such termination, exercise his or her Option to
the extent he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent that
he or she was not entitled to exercise the Option at the date of termination, or
if he or she does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee:
(i) During the term of the Option who is, at the time of his
or her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as Director for six (6) months (or such lesser period of time as is
determined by the Board) after the date of death. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired.
(ii) Three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
Notwithstanding the foregoing, in no event may the option be exercised after its
term set forth in Section 7 has expired.
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<PAGE> 7
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE
TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each outstanding
Option, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Eligible Director, at the time of
adoption of the plan for liquidation, dissolution, sale, merger, consolidation
or reorganization, either a reasonable time thereafter within which to exercise
the Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
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<PAGE> 8
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the shareholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation. Notwithstanding
the foregoing, the provisions set forth in Section 4 of this Plan (and any other
Sections of this Plan that affect the formula award terms required to be
specified in this Plan by Rule 16b-3) shall not be amended more than once every
six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option
hereunder. If such shareholder approval is obtained at a
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<PAGE> 9
duly held shareholders' meeting, it may be obtained by the affirmative vote of
the holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon. If such shareholder approval is
obtained by written consent, it may be obtained by the written consent of the
holders of a majority of the outstanding shares of the Company. Options may be
granted, but not exercised, before such shareholder approval.
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<PAGE> 10
ACCELGRAPHICS, INC.
1997 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
(Optionee)
(OptioneeAddress1)
(OptioneeAddress2)
You have been granted an option to purchase Common Stock of
AccelGraphics, Inc. (the "Company") as follows:
Date of Grant (GrantDate)
Vesting Commencement Date (VestingStartDate)
Exercise Price per Share $(ExercisePrice)
Total Number of Shares Granted (SharesGranted)
Total Exercise Price $(TotalExercisePrice)
Expiration Date (ExpirDate)
Vesting Schedule This Option may be exercised, in whole
or in part, in accordance with the
following schedule: (VestingSchedule)
Termination Period This Option may be exercised for 90
days after termination of Optionee's
Continuous Status as a Director, or
such longer period as may be
applicable upon death or Disability of
Optionee as provided in the Plan, but
in no event later than the Expiration
Date as provided above.
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<PAGE> 11
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1997 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: ACCELGRAPHICS, INC.
By:
- ----------------------------- ------------------------------------
Signature
Title:
- ----------------------------- ------------------------------------
Print Name
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<PAGE> 12
ACCELGRAPHICS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. The Board of Directors of the Company hereby grants
to the Optionee named in the Notice of Stock Option Grant attached as Part I of
this Agreement (the "Optionee"), an option (the "Option") to purchase a number
of Shares, as set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "Exercise
Price"'), subject to the terms and conditions of the 1997 Directors' Stock
Option Plan (the "Plan"), which is incorporated herein by reference.
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and the applicable provisions of the Plan and this Nonstatutory Stock
Option Agreement. In the event of Optionee's death, disability or other
termination of Optionee's employment or consulting relationship, the
exercisability of the Option is governed by the applicable provisions of the
Plan and this Nonstatutory Stock Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
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<PAGE> 13
(b) check;
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Nonstatutory Stock
Option Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
federal and California tax consequences relating to this Option under the law
in effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD
CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) EXERCISING THE OPTION. Since this Option does not qualify as
an incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option Shares
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes.
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<PAGE> 14
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Nonstatutory Stock Option Agreement.
ACCELGRAPHICS, INC.
- ----------------------------------
(Optionee) By:
-------------------------------
Title:
-------------------------------
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<PAGE> 15
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Nonstatutory Stock Option Agreement.
--------------------------------------
Spouse of Optionee
<PAGE> 16
EXHIBIT A
NOTICE OF EXERCISE
To: AccelGraphics, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase __________ shares of AccelGraphics, Inc.
Common Stock, under and pursuant to the Company's 1997 Directors' Stock Option
Plan and the Nonstatutory Stock Option Agreement dated _______________, as
follows:
Grant Number:
--------------------------------------
Date of Purchase:
--------------------------------------
Number of Shares:
--------------------------------------
Purchase Price:
--------------------------------------
Method of Payment of
Purchase Price:
--------------------------------------
Social Security No.:
--------------------------------------
The shares should be issued as follows:
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Signed:
-----------------------------------
Date:
-----------------------------------
<PAGE> 1
EXHIBIT 10.3
ACCELGRAPHICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock
Purchase Plan of AccelGraphics, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean AccelGraphics, Inc., a California
corporation and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all regular straight time gross
earnings, and shall not include payments for overtime, commissions, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation.
(f) "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, provided that such leave is for a
period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the
account of a participant pursuant to the Plan.
(h) "Designated Subsidiary" shall mean any Subsidiary which
has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "Employee" shall mean any person, including an Officer,
who is an employee of the Company for tax purposes whose customary employment
with the Company is at least twenty (20) hours per week and more than five (5)
months in a calendar year.
<PAGE> 2
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) "Purchase Date" shall mean the last day of each Purchase
Period of the Plan.
(l) "Offering Date" shall mean the first business day of each
Offering Period of the Plan.
(m) "Offering Period" shall mean a period of approximately
twelve (12) months commencing on February 1 and August 1 of each year, except
for the first Offering Period as set forth in Section 4(a).
(n) "Officer" shall mean a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
(p) "Purchase Period" shall mean a period of six (6) months
within an Offering Period, except for the first Purchase Period as set forth in
Section 4(b).
(q) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of a
given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code and provided that the Employee is not as
of such Offering Date already participating in an Offering Period under the
Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or (ii) if
such option would permit his or her rights to purchase stock under all employee
stock purchase plans (described in Section 423 of the Code) of the Company and
its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of fair market value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
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<PAGE> 3
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) OFFERING PERIODS. The Plan shall be implemented by
consecutive, overlapping Offering Periods of twelve (12) months duration, with
new Offering Periods commencing on or about February 1 and August 1 of each year
(or at such other time or times as may be determined by the Board of Directors).
The first Offering Period shall commence on the beginning of the effective date
of the Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until July 31, 1998. The
Plan shall continue until terminated in accordance with Section 19 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without shareholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering Period to be
affected.
(b) PURCHASE PERIODS. Each Offering Period shall consist of
two (2) consecutive purchase periods of six (6) months duration. The last day of
each Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on February 1 shall end on the next July 31. A
Purchase Period commencing on August 1 shall end on the next January 31. The
first Purchase Period shall commence on the IPO Date and shall end on January
31, 1998. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Purchase Period
to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 10%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Offering Date and shall end on the last payroll paid
on or prior to the last Purchase Period of the Offering Period to which the
subscription agreement is applicable, unless sooner terminated by the
participant as provided in Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) At the time a participant files his or her Subscription
Agreement, he or she shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not less than one percent (1%) and not
more than ten percent (10%) of such participant's Compensation on each such
payday. All payroll deductions made by a participant shall be
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<PAGE> 4
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(b) A participant may discontinue his or her participation in
the Plan as provided in Section 10, or, [on one occasion only during the
Offering Period], may [increase or] decrease the rate of his or her
Contributions during the Offering Period by completing and filing with the
Company a new subscription agreement. The change in rate shall be effective as
of the beginning of the next calendar month following the date of filing of the
new subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month. A participant's subscription agreement shall remain in effect
for successive Offering Periods unless terminated as provided in Section 10
hereof.
(c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased to 0% at any time during an
Offering Period. Payroll deductions shall re-commence at the rate provided in
such participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date up to a number of shares of the
Company's Common Stock determined by dividing such Employee's Contributions
accumulated prior to such Purchase Date and retained in the participant's
account as of the Purchase Date by the lower of (i) eighty-five percent (85%) of
the fair market value of a share of the Company's Common Stock on the Offering
Date, or (ii) eighty-five percent (85%) of the fair market value of a share of
the Company's Common Stock on the Purchase Date; provided, however, in no event
shall an employee be entitled to purchase during each Purchase Period more than
10,000 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 13. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 7(b).
The option shall expire on the last day of the Offering Period.
(b) The option price per share of the shares offered in a
given Offering Period shall be the lower of: (i) 85% of the fair market value of
a share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by Nasdaq or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
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<PAGE> 5
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal. For purposes of the
Offering Date under the first Offering Period under the Plan, the fair market
value of a share of the Common Stock of the Company shall be the Price to Public
as set forth in the final prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date, and the maximum number of full
shares subject to the option will be purchased at the applicable option price
with the accumulated Contributions in his or her account. The shares purchased
upon exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. No fractional shares shall be purchased. Any
payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Purchase Period or Offering Period, subject to
earlier withdrawal by the participant as provided in Section 10. Any other
monies left over in a participant's account after a Purchase Date shall be
returned to the Participant. During his or her lifetime, a participant's option
to purchase shares hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after each Purchase Date of
each Offering Period, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option or the deposit of such number of shares with
the broker selected by the Company for administration of Plan stock purchases,
as determined by the Company.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status as
an Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20) hours per week
during the Offering Period in which the employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the Contributions
credited to his or her account will be returned to him or her and his or her
option terminated.
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<PAGE> 6
(d) A participant's withdrawal from an offering will not have
any effect upon his or her eligibility to participate in a succeeding offering
or in any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC WITHDRAWAL. If the fair market value of the shares on the
first Purchase Date of an Offering Period is less than the fair market value of
the shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.
12. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
13. STOCK.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 400,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18. If the total number of shares which would otherwise be subject to
options granted pursuant to Section 7(a) on the Offering Date of an Offering
Period exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in
shares covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. Every finding`, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding upon
all parties. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of
-6-
<PAGE> 7
such participant's death subsequent to the end of a Purchase Period but prior to
delivery to him or her of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to the Purchase Date of an Offering Period. If a participant is married
and the designated beneficiary is not the spouse, spousal consent shall be
required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant (and his or her spouse, if any) at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
17. USE OF FUNDS. All Contributions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Contributions.
18. REPORTS. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Purchase Date, which statements will set forth
the amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
shareholders of the Company, the maximum number of shares each participant may
purchase each Purchase Period (pursuant to Section 7(a)), the number of shares
of Common Stock covered by each option under the Plan which has not yet been
exercised, the number of shares of Common Stock which have been authorized for
issuance under the Plan but have not yet been placed under option (collectively,
the "Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities
-7-
<PAGE> 8
of the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board. In the event of a proposed sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation, each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten the Offering Period then in progress by setting a new Purchase Date
(the "New Purchase Date"). If the Board shortens the Offering Period then in
progress in lieu of assumption or substitution in the event of a merger or sale
of assets, the Board shall notify each participant in writing, at least ten (10)
days prior to the New Purchase Date, that the Purchase Date for his or her
option has been changed to the New Purchase Date and that his or her option will
be exercised automatically on the New Purchase Date, unless prior to such date
he or she has withdrawn from the Offering Period as provided in Section 10. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration (whether
stock, cash or other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time
terminate or amend the Plan. Except as provided in Section 19, no such
termination may affect options
-8-
<PAGE> 9
previously granted, nor may an amendment make any change in any option
theretofore granted which adversely affects the rights of any participant. In
addition, to the extent necessary to comply with Rule 16b-3 under the Exchange
Act, or under Section 423 of the Code (or any successor rule or provision or any
applicable law or regulation), the Company shall obtain shareholder approval in
such a manner and to such a degree as so required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been adversely affected, the
Board (or its committee) shall be entitled to change the Offering Periods and
Purchase Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
21. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon
the earlier to occur of its adoption by the Board of Directors or its approval
by the shareholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 20.
24. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be
-9-
<PAGE> 10
deemed to contain, and such options shall contain, and the shares issued upon
exercise thereof shall be subject to, such additional conditions and
restrictions as may be required by Rule 16b-3 to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.
-10-
<PAGE> 11
ACCELGRAPHICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
AccelGraphics, Inc. 1997 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ______________, 19__ to _______________, 19__, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the
Purchase Date my participation in the Plan as provided in Section 10 of the
Plan. I also understand that I can decrease the rate of my Contributions on one
occasion only during any Offering Period by completing and filing a new
Subscription Agreement with such decrease taking effect as of the beginning of
the calendar month following the date of filing of the new Subscription
Agreement, if filed at least ten (10) business days prior to the beginning of
such month. Further, I may change the rate of deductions for future Offering
Periods by filing a new Subscription Agreement, and any such change will be
effective as of the beginning of the next Offering Period. In addition, I
acknowledge that, unless I discontinue my participation in the Plan as provided
in Section 10 of the Plan, my election will continue to be effective for each
successive Offering Period.
5. I have received a copy of the Company's most recent description of
the Plan and a copy of the complete "AccelGraphics, Inc. 1997 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
<PAGE> 12
6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
_________________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days
after the date of any such disposition, and I will make adequate provision for
federal, state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received compensation income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (2) 15% of the fair market
value of the shares on the Offering Date. The remainder of the gain, if any,
recognized on such disposition will be treated as capital gain.
-2-
<PAGE> 13
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE:______________________________
SOCIAL SECURITY #:______________________
DATE:___________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
________________________________________
(Signature)
________________________________________
(Print name)
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<PAGE> 14
ACCELGRAPHICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my
participation in the AccelGraphics, Inc. 1997 Employee Stock Purchase Plan (the
"Plan") for the Offering Period _________. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid
to me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ _______________________________________
Signature of Employee
<PAGE> 1
EXHIBIT 10.4
THE ACCELGRAPHICS, INC. 401(K) SAVINGS AND
RETIREMENT PLAN
HIGHLIGHTS AND GENERAL INFORMATION
PLAN NAME: The AccelGraphics, Inc. 401(k) Savings & Retirement
Plan.
EFFECTIVE DATE: The effective date of the PLAN is January 1, 1995.
TYPE OF PLAN: A 401(K) PLAN
PLAN YEAR: The PLAN YEAR is the 12-month period beginning on
January 1 each year and ending on December 31.
Records for the PLAN are kept on a PLAN YEAR basis.
YOUR EMPLOYER: AccelGraphics, Inc.
1942 Zanker Road
San Jose, CA 95112
Employer Identification Number:
77-0388689
Plan Number: 001
PLAN ADMINISTRATOR: AccelGraphics, Inc. will serve as PLAN
ADMINISTRATOR. Nancy Bush has been designated to
represent the PLAN ADMINISTRATOR. You may contact
your PLAN ADMINISTRATOR at: AccelGraphics, Inc.,
1942 Zanker Road, San Jose, CA, 95112 (408)452-0185
ELIGIBILITY REQUIREMENTS: - 21 years of age
- U.S. citizen or FOREIGN NATIONAL
- residing in the U.S.
YOUR CONTRIBUTIONS: - PRE-TAX CONTRIBUTIONS--1% to 20% of your
ELIGIBLE EARNINGS
- ROLLOVER CONTRIBUTIONS--funds transferred to
your ACCOUNT either directly from a QUALIFIED
retirement savings PLAN or indirectly through
an INDIVIDUAL RETIREMENT ACCOUNT (IRA)
VESTING: - 100% immediate VESTING in all contributions
made to your ACCOUNT
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
<PAGE> 2
TO MAKE CHANGES TO
YOUR ACCOUNT: - Call AnswerLine/Direct Request at
1-800-24-CIGNA
- Contact your PLAN ADMINISTRATOR
TAKING MONEY OUT
OF YOUR ACCOUNT: - LOANS
- WITHDRAWALS:
- At age 59-1/2
- Once per PLAN YEAR from your ROLLOVER
CONTRIBUTIONS
- At any time from your POST-TAX
CONTRIBUTIONS
- For financial hardships
- DISTRIBUTIONS:
- Termination
- Retirement
- DISABILITY
- Death (payment made to your
beneficiary(ies))
Note: There may be limits and tax liabilities on PLAN payments: please see your
PLAN ADMINISTRATOR for details.
PAYMENT OPTION: One-time lump sum cash payment
TRUSTEES: Nancy E. Bush, Jeffrey W. Dunn, AccelGraphics,
Inc., 1942 Zanker Road, San Jose, CA 95112
AGENT FOR LEGAL PROCESS: Your PLAN ADMINISTRATOR and the TRUSTEES are
designated to receive any summons or legal
notice informing the PLAN of a legal action in
which it may be involved.
PLAN FIDUCIARIES: The PLAN'S fiduciaries are the PLAN
ADMINISTRATOR and the TRUSTEES.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
<PAGE> 3
USING THIS "SUMMARY PLAN DESCRIPTION"
If you make this PLAN your primary method of retirement saving, you may
be able to reach your goals more quickly. Whether you've already begun to save
for your future or are Just thinking about it, the information contained in this
booklet is very important to you. Please read it very carefully.
We recognize that some aspects of the PLAN are difficult to understand.
For this reason, we have included examples throughout this booklet, which will
always appear in shaded boxes like the following example.
EXAMPLE:
================================================================================
All of the examples in this booklet will be based on the following fictional
employees:
1. BOB SMITH, Age 20
Hire Date: January 1, 1993
Annual Salary: $15,000
2. SALLY KEE, Age 45
Hire Date: January 1, 1988
Annual Salary: $20,000
================================================================================
Definitions of words or phrases that appear bolded and italicized
(e.g., PLAN) can be found in the Glossary at the end of the booklet. Following
the Glossary, you will find an Index containing IRS terms and acronyms that you
may have encountered. These terms are also bolded and italicized throughout the
text.
Remember that the information in this booklet is only an overview of
the important provisions of your PLAN. Every effort has been made to accurately
describe the PLAN provisions which are contained in the PLAN document. If there
is a difference between this booklet and the PLAN document, the PLAN document
will govern. You can review the PLAN in the PLAN ADMINISTRATOR'S office during
regular business hours if you have any questions this booklet doesn't answer. If
you want your own copy of the PLAN, please write your PLAN ADMINISTRATOR. There
may be a small charge.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
<PAGE> 4
TABLE OF CONTENTS
Page
1. Introduction............................................................ 1
Why You Should Be a Part of the Plan.................................... 1
How the AccelGraphics, Inc. 401(k) Savings & Retirement Plan Works...... 1
2. Eligibility and Enrollment.............................................. 1
3. Plan Contributions...................................................... 2
Pre-Tax Contributions................................................... 2
Rollover Contributions.................................................. 2
The Limit on Total Contributions........................................ 2
4. Obtaining Information About Your Account................................ 3
Your Participant Financial Statement.................................... 3
AnswerLine/Direct Request--1-800 Phone Inquiry.......................... 3
5. Your Investment Options................................................. 4
6. Making Changes.......................................................... 4
Changing the Amount of Your Future Contributions........................ 4
Transferring Funds and/or Changing Your Investment Choices.............. 4
7. Taking Money Out of the Plan............................................ 5
Loans................................................................... 5
Withdrawals from Your Account........................................... 7
Withdrawals of Rollover Contributions................................... 7
Withdrawals Once You Reach Age 59-1/2................................... 7
Hardship Withdrawals of Pre-Tax Contributions........................... 7
Distributions........................................................... 8
Rollover Distributions.................................................. 9
Choosing Your Payment Options........................................... 10
8. Termination of Employment............................................... 11
9. Tax Rules Affecting Plan Payments....................................... 11
Mandatory 20% Withholding............................................... 11
10% Additional Penalty Tax.............................................. 12
10. Survivor Benefits....................................................... 12
Payment of Survivor Benefits to Your Spouse............................. 13
Payment of Survivor Benefits to a Nonspouse Beneficiary................. 13
11. Events That May Affect Your Account..................................... 13
Operational and Administrative Expenses................................. 13
If the Plan Is Terminated............................................... 13
If Circumstances Require the Delay of a Withdrawal...................... 14
Transfers from the Guaranteed Long-Term Fund May Be Limited............. 14
If Court Issues a Domestic Relations Order.............................. 14
<PAGE> 5
TABLE OF CONTENTS
(cont'd)
If You Are a Highly Compensated Employee................................ 14
12. Your ERISA Rights....................................................... 15
If Your Request for Retirement Income is Denied......................... 15
Requesting a Review of the Denial....................................... 16
Time Extensions......................................................... 17
Other Rights You May Have............................................... 17
Approval by the IRS..................................................... 17
13. Glossary................................................................ 17
14. Index of Acronyms and IRS Terms......................................... 21
ii
<PAGE> 6
1. INTRODUCTION
WHY YOU SHOULD BE A PART OF THE PLAN
In the following pages, you will read about one of your most important
company benefits, the AccelGraphics, Inc. 401(k) Savings & Retirement Plan. If
you become a PARTICIPANT, you can:
- Reduce the amount of taxes you own now;
- Postpone paying taxes on money you save and the investment income it
earns; and
- Build retirement equity for your future.
HOW THE ACCELGRAPHICS, INC. 401(K) SAVINGS & RETIREMENT PLAN WORKS
When you enroll in the PLAN, you decide what percentage of your pay you
want to save through the PLAN and how you would like your savings invested. You
may contribute from your gross (pre-tax) salary. The money you put into the PLAN
is automatically deducted from your paycheck, deposited into your individual
ACCOUNT, and invested according to your instructions.
There are some limits to these contributions which you will find
explained in detail in Chapter 3, Plan Contributions, on page 3.
You control your ACCOUNT. You may change the amount you choose to
contribute or stop contributing altogether. You may also make changes in the way
your money is invested.
2. ELIGIBILITY AND ENROLLMENT
You can enroll in the AccelGraphics, Inc. 401(k) Savings & Retirement
Plan if you meet the following requirement:
- You are 21 years old
- You are a U.S. citizen or FOREIGN NATIONAL residing in the U.S.
Once you are eligible to participate, your PLAN ADMINISTRATOR will
provide you with enrollment information. Your participation will be effective on
the first day of the month next following the date you enroll.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-1-
<PAGE> 7
If you are a FORMER EMPLOYEE who has been rehired, please consult your
PLAN ADMINISTRATOR for details about your participation in the AccelGraphics,
Inc. 401(k) Savings & Retirement Plan.
3. PLAN CONTRIBUTIONS
PRE-TAX CONTRIBUTIONS
PRE-TAX CONTRIBUTIONS are subtracted from the amount you report to
the IRS as taxable income. You will pay no income taxes on PRE-TAX CONTRIBUTIONS
or investment earnings on these contributions until you take them out of the
PLAN.
You may contribute an amount from 1% to 20% of your ELIGIBLE
EARNINGS. PRE-TAX CONTRIBUTIONS will automatically be deducted from your
paycheck each pay period.
<TABLE>
<CAPTION>
================================================================================
ANNUAL % PRE-TAX TOTAL ANNUAL
EMPLOYEE PAY CONTRIBUTION CONTRIBUTION
================================================================================
<S> <C> <C> <C>
Bob Smith $15,000 3% $450
- --------------------------------------------------------------------------------
Sally Kee $20,000 6% $1,200
================================================================================
</TABLE>
LIMITS ON PRE-TAX CONTRIBUTIONS
The IRS limits the total amount of your PRE-TAX CONTRIBUTIONS each
year. This amount is adjusted for inflation every year. For 1995, the limit is
$9,240. This limit applies to amounts you contribute to 401(K) PLANS. Any amount
that you contribute in excess of this limit will be returned to you and treated
as taxable income.
Rollover Contributions
Money from your former EMPLOYER'S qualified retirement plan may be
"rolled over" to your account either directly or through an INDIVIDUAL
RETIREMENT ACCOUNT (IRA). There are special rules for ROLLOVER CONTRIBUTIONS.
Please contact your PLAN ADMINISTRATOR for more details.
The Limit on Total Contributions
In addition to the annual limit on PRE-TAX CONTRIBUTIONS, there is also
a limit on the total amount of all types of contributions (excluding ROLLOVER
CONTRIBUTIONS) you receive each year. This limit is the smaller of two amounts:
- $30,000 (to be adjusted for inflation each year); or
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-2-
<PAGE> 8
- 25% of your salary.
The IRS also places special limitations on the contributions of HIGHLY
COMPENSATED EMPLOYEES. If you need more information on these limits, please see
your PLAN ADMINISTRATOR.
4. OBTAINING INFORMATION ABOUT YOUR ACCOUNT
There are several ways to get information and answers to questions
about your ACCOUNT.
YOUR PARTICIPANT FINANCIAL STATEMENT
Periodically you will receive a statement which summarizes all the
activity in your ACCOUNT, including new contributions, WITHDRAWALS and LOANS, as
well as earnings/losses on your investments.
ANSWERLINE/DIRECT REQUEST--1-800 PHONE INQUIRY
The AnswerLine/Direct Request service allows you to make changes to
your investments, change the amount you contribute and obtain information about
your ACCOUNT. Using AnswerLine/Direct Request is very easy. To access
AnswerLine/Direct Request, call 1-800-24-CIGNA (1-800-242-4462). A series of
voice prompts will guide you through the inquiry and transaction process.
To access AnswerLine/Direct Request, you will need:
- A touch-tone phone
- Your Social Security Number
- Your assigned Personal Identification Number (PIN)
AnswerLine/Direct Request is available Monday through Friday, 8:00 a.m.
to 12:00 a.m., and Saturday and Sunday, 8:00 a.m. to 4:00 p.m., eastern time.
5. YOUR INVESTMENT OPTIONS
You can choose to invest contributions in the wide variety of funds
offered under your PLAN. Each of these funds is designed with a specific
investment objective. You should become familiar with each fund's investment
goals and level of risk before making your investment decision.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-3-
<PAGE> 9
Information on the funds was included with your enrollment materials
and is available through AnswerLine. Please contact your PLAN ADMINISTRATOR if
you would like further information on the funds your PLAN offers.
6. MAKING CHANGES
As your personal situation changes, you may decide to change the amount
you elect to contribute and/or your investment choices. Your PLAN allows you to
make the changes you need by following these simple guidelines:
CHANGING THE AMOUNT OF YOUR FUTURE CONTRIBUTIONS
You can change the amount of your PRE-TAX CONTRIBUTIONS on January 1,
April 1, July 1 or October 1.
TRANSFERRING FUNDS AND/OR CHANGING YOUR INVESTMENT CHOICES
You may change the way your future contributions are invested among
your PLAN'S various investment funds. You may also transfer money already in
your ACCOUNT between the funds. To perform these transactions you may call
AnswerLine/Direct Request or contact your PLAN ADMINISTRATOR.
Transfers do not change the way your future contributions are
allocated; if you want to change the way your future contributions will be
invested, you must specifically request such a change.
You will receive written confirmation of your transaction by mail.
7. TAKING MONEY OUT OF THE PLAN
Please read this section very carefully before deciding to take money
out of your ACCOUNT. You should also review Chapter 10, Tax Rules Affecting Plan
Payments. on page 9.
You may receive money from your ACCOUNT in three ways:
- LOANS
- WITHDRAWALS
- DISTRIBUTIONS
LOANS
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-4-
<PAGE> 10
Your PLAN lets you borrow from your ACCOUNT BALANCE. To apply for a
LOAN, you must be an ACTIVE EMPLOYEE and you may not already have more than one
LOAN outstanding. If you are married, your spouse may need to consent to your
taking a LOAN.
TYPES OF LOANS:
- General purpose LOAN
- LOAN used to purchase your primary residence
LIMITS ON THE AMOUNT YOU MAY BORROW
The minimum amount you can borrow is $1000. The maximum is 50%
of your entire ACCOUNT BALANCE. You may never borrow more than $50,000 minus the
highest outstanding balance on any individual PLAN LOAN during the last 12
months.
APPLYING FOR A LOAN
You may request a LOAN by filling out an application form
provided by your PLAN ADMINISTRATOR.
You will be required to sign a note promising to repay the
amount of the LOAN, plus interest. This promissory note verifies that your
ACCOUNT BALANCE will be used as collateral, guaranteeing that your LOAN will be
paid back to your ACCOUNT.
Your LOAN request will be based on the same criteria used by
commercial lending institutions. Your PLAN ADMINISTRATOR has the authority to
set interest rates based on regulatory guidelines. Since interest rates are
changing constantly, you should check with your PLAN ADMINISTRATOR for the
current rate at the time of your LOAN application. Once your LOAN is approved,
the rate will remain in effect until you repay the LOAN.
If you change your mind about a LOAN after receiving an
application from your PLAN ADMINISTRATOr, simply discard the application.
However, LOANS approved by your PLAN ADMINISTRATOR cannot be canceled.
LOAN REPAYMENT
Generally, you may take up to five years to repay a general
purpose LOAN, in equal monthly installments. If you are using the LOAN to
purchase your primary residence, your PLAN ADMINISTRATOR may allow you a longer
repayment period. You must repay the LOAN through payroll deductions. While you
are on an authorized unpaid leave of absence, you are not required to make loan
payments for up to a year.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-5-
<PAGE> 11
Your PLAN may allow you to prepay your LOAN, at any time,
without penalty. When you repay the LOAN, both the principal and the interest
will be reinvested in your ACCOUNT.
DEFAULTING ON A LOAN
If you do not make any payment due within any 90-day period,
your PLAN ADMINISTRATOR may determine that your LOAN is in default. If this
happens:
- The full amount will be due and payable immediately.
- The outstanding balance of the LOAN will be reported to
the IRS as ordinary income and you will have to pay
federal and state income tax on this amount.
- Future applications you make for a LOAN may be denied.
If you think you are in danger of defaulting on a LOAN,
contact your PLAN ADMINISTRATOR immediately.
WITHDRAWALS FROM YOUR ACCOUNT
Under certain circumstances, you are permitted to withdraw money from
your ACCOUNT while you are working. In some cases, these WITHDRAWALS, are not
restricted. In other cases they are subject to specific requirements. If you are
married, your spouse may need to consent to your taking a WITHDRAWAL.
Note: The law does not permit you to repay any WITHDRAWALS--that is, to
put the funds back into the PLAN for continued tax-free accumulation.
WITHDRAWALS OF ROLLOVER CONTRIBUTIONS
You may WITHDRAW all or a portion of the value of your ROLLOVER
CONTRIBUTIONS once during a PLAN YEAR at any time.
WITHDRAWALS ONCE YOU REACH AGE 59-1/2
You may WITHDRAW all or a portion of your ACCOUNT BALANCE once you have
reached age 59-1/2.
HARDSHIP WITHDRAWALS OF PRE-TAX CONTRIBUTIONS
HARDSHIP WITHDRAWALS of PRE-TAX CONTRIBUTIONS are treated differently
than HARDSHIP WITHDRAWALS of other types of contributions.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-6-
<PAGE> 12
To obtain approval for a HARDSHIP WITHDRAWAL of your PRE-TAX
CONTRIBUTIONS, you must demonstrate to your PLAN ADMINISTRATOR that you have a
"serious financial hardship" due to one of the following reasons:
- Medical expenses for which you will not be reimbursed,
which have been or will be incurred by you, your spouse,
or any of your dependents.
- Costs directly related to the purchase of your primary
residence (not including mortgage payments).
- Tuition payments and related educational fees for the next
12 months of post-secondary education for you, your
spouse, your children, or any of your dependents.
- Payments needed to prevent your eviction from your
personal residence or to prevent foreclosure on the
mortgage on your residence.
The IRS mandates that earnings on your PRE-TAX CONTRIBUTIONS may not be
withdrawn even in the case of financial hardship.
In the case of a serious financial hardship, you are allowed to
withdraw only the amount you need in order to resolve that hardship; however,
you can withdraw enough to cover any federal, state and local taxes, and
penalties which may result from the WITHDRAWAL.
DISTRIBUTIONS
You are automatically eligible to receive a DISTRIBUTION of your
ACCOUNT BALANCE when you:
- Retire
- Terminate
- Become DISABLED
- Die (in which case payment will be made to your
BENEFICIARY(IES))
NORMAL RETIREMENT
NORMAL RETIREMENT under this PLAN occurs when you reach age 65
or older. If you are an ACTIVE EMPLOYEE on or after the date you turn 65, you
will be eligible to
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-7-
<PAGE> 13
receive a full DISTRIBUTION regardless of your YEARS OF SERVICE when you leave
the company.
AFTER AGE 70-1/2
If you're still employed on or after age 70-1/2, you must
begin to receive a DISTRIBUTION of your ACCOUNT not later than April 1 following
the calendar year in which you reach the age of 70-1/2.
TERMINATION
If you leave employment before you retire, you will be
entitled to a lump sum payment equal to your ACCOUNT BALANCE which you may take
as a personal cash payment or roll over into either your own INDIVIDUAL
RETIREMENT ACCOUNT (IRA) or another QUALIFIED PLAN.
For information on your potential tax liabilities, see Chapter
10, Tax Rules Affecting Plan Payments, on page 9, and the section on Rollover
Distributions below.
PERMANENT DISABILITY
If you become permanently DISABLED while employed, you will be
eligible for a full cash DISTRIBUTION, regardless of your YEARS OF SERVICE. You
are considered permanently DISABLED if:
- You are unable to work for pay because of a medically
certified physical or mental impairment; or
- You qualify for social security DISABILITY payments.
DEATH
If you die while employed, your BENEFICIARY(IES) will receive
the full value of your ACCOUNT. If you are married, your spouse will be the
BENEFICIARY unless he or she has willingly given up that right. This is
discussed in more detail in Chapter 11, Survivor Benefits, on page 9.
ROLLOVER DISTRIBUTIONS
You may defer paying tax on some taxable payments by electing a
rollover DISTRIBUTION, for payments of $200 or more, instead of a personal
payment. There are two different types of rollover DISTRIBUTIONS:
DIRECT ROLLOVER
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-8-
<PAGE> 14
In a direct rollover, all funds due to you are sent to either
an INDIVIDUAL RETIREMENT ACCOUNT (IRA) or another QUALIFIED PLAN. No funds are
paid to you. By directly rolling over the taxable portion of your funds, you
avoid the mandatory 20% withholding. See Chapter 10, Tax Rules Affecting
Payments, on page 9. If you have an outstanding LOAN and you want to roll over
your entire ACCOUNT balance, you must either repay your LOAN before taking a
DISTRIBUTION or roll over the LOAN'S promissory note. However, the LOAN'S
promissory note may not be rolled over to an IRA. It may only be rolled over to
another QUALIFIED PLAN.
If you terminate employment with an outstanding LOAN balance,
in order to prevent it from being considered in default, you may request that
the LOAN'S promissory note be directly rolled over to another QUALIFIED PLAN,
subject to the provisions of the receiving PLAN and the LOAN'S promissory note.
Your payment will not be taxed until you take it out of the
IRA or QUALIFIED PLAN. Therefore, you will pay no tax on it in the current year
and no income tax will be withheld from the payment.
INDIRECT ROLLOVER
In an indirect rollover, all funds are first paid to you. Your
PLAN ADMINISTRATOR is required by law to withhold 20% of the taxable portion of
your funds for income taxes. The 20% withheld is credited to your taxes due when
you file your income tax return. You may roll over the remaining 80% of the
funds to an INDIVIDUAL RETIREMENT ACCOUNT (IRA) or another QUALIFIED PLAN within
60 days of the time you receive the DISTRIBUTION.
You will not be taxed on the amount rolled over until you take the
money out of the IRA or QUALIFIED PLAN.
If you wish to roll over the full 100% of the taxable portion of your
payment, you will have to make up 20% of the payment from another source. If you
only roll over the 80% that you actually received, you will be taxed on the 20%
that was withheld but not rolled over. See Chapter 10, Tax Rules Affecting Plan
Payments, on page 9.
CHOOSING YOUR PAYMENT OPTIONS
Your PLAN offers a single lump sum DISTRIBUTION in addition to the
rollover DISTRIBUTIONS described above. Your PLAN ADMINISTRATOR will give you a
notice that describes the features of this form of payment, as well as its
relative value to you.
There are several choices you may need to make. You may choose to:
- Consent to the payment;
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-9-
<PAGE> 15
- Postpone payment to a later date (unless you are retiring
after your NORMAL RETIREMENT DATE, in which case you are
generally not permitted to postpone payment); or
- Take no action, in which case payment will generally be
made at your NORMAL RETIREMENT DATE, in the form of a
single-sum cash payment.
Once payments begin, your choice may not be changed, no matter what the
circumstances.
SPOUSAL CONSENT
If you are married, your spouse may need to agree to any
payment. Your spouse's consent must meet certain rules:
- He or she must sign a consent form.
- Either the signature must be notarized or a representative
from the PLAN must sign the form, witnessing your spouse's
signature.
- The form must state what your spouse has agreed to
Spousal consent can be waived when the PLAN ADMINISTRATOR
receives adequate proof that your spouse cannot be located.
If you have additional questions about spousal consent
requirements, you should contact your PLAN ADMINISTRATOR.
8. TERMINATION OF EMPLOYMENT
If you leave the company, you are entitled to the value of all your
PRE-TAX CONTRIBUTIONS.
9. TAX RULES AFFECTING PLAN PAYMENTS
MANDATORY 20% WITHHOLDING
Whenever you receive a DISTRIBUTION from the PLAN, other than periodic
annuity or installment payments, and there is no direct rollover to an IRA or
another QUALIFIED PLAN, the IRS requires your Plan ADMINISTRATOR to withhold 20%
of the DISTRIBUTION. This 20%
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-10-
<PAGE> 16
withholding is not a tax; it is credited to any future federal income tax that
you may owe. This amount will automatically be deducted from the amount paid to
you.
- --------------------------------------------------------------------------------
Example:
Sally Kee, age 45, decides to leave the company. She initially elects a personal
payment of her account balance. A month later, she starts a new job and wishes
to roll over her distribution into her new employees qualified plan.
<TABLE>
<S> <C>
Her account balance is: $10,000
Less 20% withholding: - 2,000
-------
Total cash received $ 8,000
</TABLE>
- --------------------------------------------------------------------------------
10% ADDITIONAL PENALTY TAX
Any payment of taxable money from your ACCOUNT is generally subject to
an additional 10% federal tax penalty if you take it out "early," which is
defined as:
- Before you reach the age of 59-1/2.
- For reasons other than permanent DISABILITY or death
This penalty tax does not apply to the following types of payments:
- Any full DISTRIBUTION made when you terminate employment
at or after age 55.
- Any WITHDRAWALS used to pay unreimbursed medical expenses
for you or your dependents, as long as those unreimbursed
medical expenses are more than 7.5% of your adjusted gross
income, as reported on your Form 1040 federal tax return.
- Any DISTRIBUTION made under the terms of a QUALIFIED
DOMESTIC RELATIONS ORDER, which is a court order creating
or recognizing an alternate payee's (e.g., spouse, former
spouse, child) right to part or all of your PLAN benefits.
See Chapter 12, Events That May Impact Your Account, on
page 11 for more information about DOMESTIC RELATIONS
ORDERS.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-11-
<PAGE> 17
- Any corrective DISTRIBUTIONS necessary to comply with IRS
contribution limits.
- Any DISTRIBUTIONS or WITHDRAWALS of your POST-TAX
CONTRIBUTIONS. (The 10% additional penalty tax will apply,
however, to investment gains on these contributions.)
If you have questions about tax rules affecting PLAN payments, please
contact your tax advisor.
10. SURVIVOR BENEFITS
Survivor benefits are an important part of the financial security and
peace of mind this PLAN provides. In this section, we discuss these benefits in
more detail as well as the decisions you'll need to make about them before you
retire.
PAYMENT OF SURVIVOR BENEFITS TO YOUR SPOUSE
If you die before you've started to receive payment of your benefit,
your spouse is entitled to a lump sum payment of your ACCOUNT.
Your spouse's choice of payment options may be limited by certain IRS
tax rules, in which case your PLAN ADMINISTRATOR will provide your spouse with
any necessary information.
With a cash payment, the DISTRIBUTION must be made no later than five
years after your death.
PAYMENT OF SURVIVOR BENEFITS TO A NONSPOUSE BENEFICIARY
If you die before you've started to receive payment of your ACCOUNT:
If your ACCOUNT BALANCE is more than (or at the time of any prior
DISTRIBUTION was more than) $3,500, your BENEFICIARY will receive payment of
your ACCOUNT BALANCE within a reasonable period after the PLAN ADMINISTRATOR has
been notified of your death. Your BENEFICIARY may also specifically choose to
postpone a cash payment for up to five years after your death.
11. EVENTS THAT MAY AFFECT YOUR ACCOUNT
Here are some of the events that could have an impact on your ACCOUNT.
Please note how your contributions and/or benefits would be affected in each
case.
OPERATIONAL AND ADMINISTRATIVE EXPENSES
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-12-
<PAGE> 18
These expenses may be deducted from your ACCOUNT.
IF THE PLAN IS TERMINATED
You may expect the PLAN to continue indefinitely; however, unforeseen
circumstances may occur. If this PLAN is terminated and a successor qualified
salary deferral retirement PLAN is not established, you will be entitled to
receive payment of your ACCOUNT BALANCE.
IF CIRCUMSTANCES REQUIRE THE DELAY OF A WITHDRAWAL
All WITHDRAWALS may be delayed by Connecticut General Life Insurance
Company under certain circumstances. A description of these situations may be
obtained from your PLAN ADMINISTRATOR. Regardless of the circumstances, there
will be no delay in payment in cases of death, retirement, termination of
employment, or total and permanent DISABILITY.
TRANSFERS FROM THE GUARANTEED LONG-TERM FUND MAY BE LIMITED
Under certain circumstances the amount transferred from the guaranteed
long-term fund to other investment funds may be limited by Connecticut General
Life Insurance Company. Please see your PLAN ADMINISTRATOR for further
information on transferring funds from the guaranteed long-term fund.
IF COURT ISSUES A DOMESTIC RELATIONS ORDER
If you become divorced or separated, the court may assign part or all
of your benefit to an alternate payee (such as your spouse, former spouse, child
or other dependent) through a DOMESTIC RELATIONS ORDER. This is a court order
that recognizes the alternate payee's right to part or all of your benefit.
While ERISA (the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974) generally
protects PLAN benefits against creditors, DOMESTIC RELATIONS ORDERS that are
deemed qualified by the PLAN ADMINISTRATOR are an exception.
A QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) can force payment of
benefits to an alternate payee even though the PLAN prohibits DISTRIBUTIONS
earlier than retirement, termination, death, or DISABILITY. The law requires
that your PLAN ADMINISTRATOR determine, within a reasonable amount of time,
whether the DOMESTIC RELATIONS ORDER is qualified. Your PLAN ADMINISTRATOR must
follow specific procedures to ensure that your benefits are properly
distributed. This can sometimes be a time-consuming process. You and each
alternate payee will be notified of the PLAN ADMINISTRATOR'S decision.
IF YOU ARE A HIGHLY COMPENSATED EMPLOYEE
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-13-
<PAGE> 19
To ensure that the PLAN does not offer unfair advantages to some
employees over others, the Internal Revenue Code places some restrictions on the
participation in the PLAN by HIGHLY COMPENSATED EMPLOYEES. To make sure these
restrictions are followed, certain tests are performed each year and any
necessary corrective actions must be taken.
Most employees are permitted to save up to 25% of their ELIGIBLE
EARNINGS on a tax-deferred basis. However, HIGHLY COMPENSATED EMPLOYEES may be
limited in the amounts they may contribute to the PLAN.
The Internal Revenue Code has also placed limits on the amounts of
EMPLOYER contributions made to the ACCOUNTS of HIGHLY COMPENSATED EMPLOYEES.
If you are a HIGHLY COMPENSATED EMPLOYEE, you should contact your PLAN
ADMINISTRATOR to see how your ACCOUNT may be affected by these restrictions.
12. YOUR ERISA RIGHTS
PARTICIPANTS in the PLAN have certain rights and protection under the
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, commonly known as ERISA. ERISA
states that, as a PLAN PARTICIPANT, you are entitled to:
- Examine, without charge, all PLAN documents at the PLAN
ADMINISTRATORS' office and other specified locations.
These documents include insurance contracts and copies of
all documents, such as annual reports and PLAN
descriptions, filed by the PLAN with the U.S. Department
of Labor:
- Obtain copies of all PLAN documents and other PLAN
information upon a written request directed to the PLAN
ADMINISTRATOR. The PLAN ADMINISTRATOR may charge a
reasonable amount for the copies; and
- Receive a summary of the PLAN'S annual financial report.
The PLAN ADMINISTRATOR is legally required to give
PARTICIPANTS a copy of this summary annual report.
Further, you may not be fired or discriminated against in any way as a
means of preventing you from obtaining your RETIREMENT BENEFITS, or exercising
your rights under ERISA.
IF YOUR REQUEST FOR RETIREMENT INCOME IS DENIED
ERISA regulations describe steps that must be taken in the rare cases
when a claim for payment is denied, either in whole or in part. A claim might be
denied if:
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-14-
<PAGE> 20
- The PLAN ADMINISTRATOR does not believe that you are
entitled to Payment; or
- The PLAN ADMINISTRATOR disagrees with the payment amount
to which you believe you are entitled.
If your claim is denied, the PLAN ADMINISTRATOR has to notify you in
writing within 90 days after receiving your claim. The notice must contain the
following information:
- The specific reason(s) your claim was denied.
- The PLAN provisions that support the denial.
- If your application was incomplete, the additional
information needed to complete your claim request and an
explanation of why it is needed.
- Information on what you need to do in order to have the
claim denial reviewed.
If you do not receive notice on the status of your claim from the PLAN
ADMINISTRATOR within 90 days, or within 180 days if it is a special case (see
Time Extensions on page 14 in this chapter), you can assume your claim has
denial been denied and you may request a review of your denial.
REQUESTING A REVIEW OF THE DENIAL
Once the PLAN ADMINISTRATOR has reviewed your claim and notified you in
writing of the denial within the required 90-day period, you may contest the
denial. You must submit a written request for a review of that denial within 60
days of the date of the PLAN ADMINISTRATOR'S written notification. In case the
PLAN ADMINISTRATOR does not notify you of the denial within the required 90-day
period, your request for review should be submitted immediately after the 90-day
period expires.
If you wish, you (or your representative) may review the appropriate
PLAN documents and submit written information supporting your claim to the
appropriate FIDUCIARY. Within 60 days of your request, the PLAN FIDUCIARIES
should notify you in writing of the final decision. This notification must:
- Be written in clear, easily understood language; and
- Inform you of the decision, the reasons why that decision
was made, and the specific PLAN provisions that support
it.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-15-
<PAGE> 21
If you do not receive a decision on your request for review within 60
days, you can assume your request has been denied.
If you disagree with the results of the review, you may file suit in
federal or state court. If your suit is successful, the court may award you
legal costs, including attorneys' fees.
TIME EXTENSIONS
Under special circumstances, the 90-day and 60-day notification periods
just discussed may be extended by up to 90 days. You will be informed in writing
of any extensions before the end of these notification periods. The extension
notice will state the special circumstances necessitating the delay and the
revised date by which you may expect a decision.
OTHER RIGHTS YOU MAY HAVE
Under ERISA, there are steps you can take to enforce your rights. For
instance, if you request materials from the PLAN and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the PLAN ADMINISTRATOR to provide the documents and pay you up to $100 a
day until you receive them--unless you did not receive the materials for reasons
beyond the PLAN ADMINISTRATOR'S control. In addition to defining the rights of
PLAN PARTICIPANTS, ERISA imposes obligations on the people responsible for
operating the plan. These persons are legally referred to as FIDUCIARIES and
must act prudently and in the sole interest of the PLAN'S PARTICIPANTS and
BENEFICIARIES. If the FIDUCIARIES misuse the PLAN'S money or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, however, or if the court finds your claim to be frivolous, the court may
order you to pay these costs and fees.
If you have any questions about your PLAN, you should contact the PLAN
ADMINISTRATOR. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
APPROVAL BY THE IRS
This PLAN is intended to be a "qualified" PLAN under Internal Revenue
Code section 401(a). Therefore, certain contributions made to the PLAN are not
taxable to you until distributed. In the unlikely event that the IRS determines
that the PLAN does not meet its qualification requirements, all contributions
will cease. At such time, some or all of your
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-16-
<PAGE> 22
contributions may be returned. Any contributions that are returned to you are
taxable to you in the year that the DISTRIBUTION is made from the disqualified
PLAN.
FOR ADDITIONAL INFORMATION CONTACT:
AnswerLine at 1-800-24-CIGNA
-17-
<PAGE> 23
13. GLOSSARY
ACCOUNT
An individual account is maintained for you under the plan. An account
contains all contributions made on your behalf and includes earnings or
losses on those contributions.
ACTIVE EMPLOYEE
An active employee is someone who is currently employed by the
employer.
ACTUARIAL EQUIVALENT
Actuaries compare plan benefits based on mathematical assumptions such
as the interest rate your account will earn and the life expectancy of
you and your beneficiary. A benefit that is found to have substantially
the same value as another is said to be the actuarial equivalent of the
other.
BENEFICIARY
The person to whom the funds in your account will be distributed in the
event of your death.
CONTRIBUTION PERIOD
For employee contributions, the regular period (either monthly or
four-weekly) for which Participants make these contributions. For
employer contributions, the regular period (not less than four
weeks-not more than one year) in which the employer intends to make
contributions.
DISABLED
If you should become unable to engage in any substantial gainful
activity because of a medically determinable physical or mental
impairment which can be expected to continue indefinitely, your Plan
Administrator may deem you to be disabled.
DISTRIBUTION
Any Payments made from your account.
DOMESTIC RELATIONS ORDER (SEE QUALIFIED DOMESTIC RELATIONS ORDER)
ELIGIBLE EARNINGS
Eligible earnings are your wages for the plan year. Eligible earnings
may also include amounts contributed by your employer on your behalf to
any salary deferral arrangements, even though these amounts are
excluded from your gross income for tax purposes.
The plan does not recognize compensation amounts that exceed an
inflation-adjusted annual limit, which is $150,000 for 1995. In some
cases, this limit may
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<PAGE> 24
apply to an entire family working for the same employer. In addition,
if you join the plan within the plan year, your limit will be adjusted
accordingly.
EMPLOYER
The entity (usually a company or Partnership) whose employees are
covered under the retirement plan. In the case of a group of employers
which constitutes a controlled group of corporations or an affiliated
service group, all such employers shall be considered as a single
employer for purposes of the plan.
FIDUCIARY
A person who has discretionary control over or responsibility for plan
administration and/or its assets.
FOREIGN NATIONAL
Someone who is a non-United States citizen. Plan sponsors usually allow
foreign nationals working and residing in the United States to
participate.
FORMER EMPLOYEE
A former employee is an employee who is no longer employed by the
employer.
HARDSHIP WITHDRAWAL
An emergency withdrawal of certain funds from your account due to a
serious financial hardship. Specific requirements must be followed in
demonstrating the need and amount of a hardship withdrawal.
HIGHLY COMPENSATED EMPLOYEES
Under the Internal Revenue Code, an employee is regarded as "highly
compensated" if he or she meets any of the criteria listed below. The
dollar amounts shown below are 1995 figures and are adjusted annually
based on cost-of-living factors determined by the government.
- Owns at least 5% of the company; or
- Earns more than $100,000 a year; or
- Earns more than $66,000 a year and is in the top 20% of
all employees in terms of compensation; or
- Is an officer of the company and earns more than $60,000 a
year.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
An IRA is an individual retirement account established to save money
for retirement. With an IRA, taxes are deferred on the interest your
investment earns, and at times taxes on the contributions themselves
are also deferred.
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INTEGRATION LEVEL
An established amount of a participant's eligible earnings above which
the rate of discretionary contributions made is higher than the rate
applied to eligible earnings below that level.
KEY AND NON-KEY EMPLOYEES
Key employees are generally certain officers, managers and owners of
the employer. If a plan becomes top-heavy in any plan year, the
benefits earned by that year's non-key employees may be increased.
LOAN
A portion of your account balance which you borrow and agree to repay
with interest.
NORMAL RETIREMENT DATE
The first day of the month following the date you attain the normal
retirement age specified in the Plan.
PARTICIPANT
A participant is an employee who is eligible to participate under the
terms of a qualified plan or who has a right to a benefit from the
plan.
PLAN
The plan that your employer is maintaining to help you save for your
retirement years.
PLAN ADMINISTRATOR
Your Plan Administrator is the person or entity who is responsible for
the operation of your plan.
PLAN YEAR
The period of 12 consecutive months for which records are kept and
assets are valued.
PRERETIREMENT SURVIVOR ANNUITY (PSA)
A life-long annuity to which your spouse may be entitled if you die
before you have started to receive your retirement benefit. The value
of a preretirement survivor annuity must be the actuarial equivalent of
at least 50% of your account balance as of the date of your death.
PRE-TAX CONTRIBUTIONS
An arrangement between you and your employer in which you consent to
"defer" a certain amount of salary each pay period. Your employer then
deposits this money into your account.
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PRIOR EMPLOYEE CONTRIBUTIONS
Prior employee contributions are monies from an employee contribution
feature which has been discontinued.
QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)
A domestic relations order deemed qualified by a Plan Administrator. A
qualified domestic relations order can force payment of plan benefits
to an alternate payee (e.g., spouse, former spouse, child), even though
the plan normally prohibits distributions earlier than retirement,
termination, death, or disability.
RETIREMENT BENEFIT
The funds paid to you or your designated beneficiary once you separate
from service after reaching the earliest retirement date described
under the terms of the plan.
ROLLOVER CONTRIBUTIONS
Contributions from a retirement plan established by a former employer
which are "rolled over" to the current plan either directly or through
an Individual Retirement Account (IRA). If the money is rolled directly
from one qualified plan to another, the money is not actually
distributed to you and is not subject to income tax withholding.
SALARY DEFERRAL ARRANGEMENT (See PRE-TAX CONTRIBUTIONS)
SERVICE
Your length of employment with the employer.
SEVERANCE FROM SERVICE
This is the earlier of the date you terminate employment as a result of
voluntary quit, retirement, discharge or death or the first anniversary
of the date you are absent for vacation, holiday, sickness, disability,
leave of absence or layoff.
TOP HEAVY
A plan is regarded as top heavy when the current value of accounts
attributable to key employees is 60% or more of the total current value
of all accounts in the plan.
TRUSTEE
An individual or entity appointed by the employer's board of directors
who holds title to plan assets and may be responsible for managing the
assets.
WITHDRAWAL
Money taken out of the interest of your account before you qualify for
a distribution.
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14. INDEX OF ACRONYMS AND IRS TERMS
401 (K) PLAN
A plan which allows participants to defer taxable income by making
pre-tax contributions to the plan. Federal income tax is deferred until
a distribution is made.
ACTUAL CONTRIBUTION PERCENTAGE (ACP) TEST
A test that is performed each plan year for all plans that allow
employee post-tax and/or employer matching contributions. The test
ensures that such contributions do not discriminate in favor of highly
compensated employees.
ACTUAL DEFERRAL PERCENTAGE (ADP) TEST
A test that is performed each plan year for all 401 (k) plans to ensure
that employee pre-tax contributions do not discriminate in favor of
highly compensated employees.
ANNUAL ADDITIONS/415 LIMITATIONS
A limit on all employer and employee contributions (pre-tax and
post-tax) and forfeitures allocated to a participant's account. The
annual additions limitation is the lesser of $30,000 (as indexed) or
25% of eligible earnings for each year.
DEPARTMENT OF LABOR (DOL)
A U.S. Government agency that, among other responsibilities,
administers the labor, regulatory, and administrative provisions of
ERISA.
EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) OF 1974
ERISA is the law designed to protect the rights of participants and
beneficiaries of employee benefit plans. ERISA imposes various plan
qualification standards and fiduciary responsibilities.
INTERNAL REVENUE CODE (IRC)
The Internal Revenue Code of 1986 is the body of law governing the
federal taxation of individuals and entities business
INTERNAL REVENUE SERVICE (IRS)
The agency of the Federal Treasury Department charged with
administering, interpreting, and enforcing the tax code. The IRS also
determines whether a plan complies with federal tax regulations for
qualified plans.
QUALIFIED PLAN
A pension or profit sharing plan that meets the requirements of
Internal Revenue Code section 401 (a) and qualifies for special tax
considerations.
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SOCIAL SECURITY TAXABLE WAGE BASE
An annually established amount on which social security benefits are
based. The taxable wage base for 1995 is $61,200. Some plans use the
social security taxable wage base as the integration level in
determining the amount of discretionary contributions.
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EXHIBIT 10.5
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is made as of this Day day of
Month, 19Year, by and between AccelGraphics, Inc., a California corporation (the
"COMPANY"), and Indemnitee ("INDEMNITEE").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the increases in the
cost of such insurance and the general reductions in the coverage of such
insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Agreement to Serve. In consideration of the protection afforded
by this Agreement, if Indemnitee is a director of the Company he or she agrees
to serve at least for the balance of the current term as a director and not to
resign voluntarily during such period without the written consent of a majority
of the Board of Directors. If Indemnitee is an officer of the Company not
serving under an employment contract, he or she agrees to serve in such capacity
at least for the balance of the current fiscal year of the Company and not to
resign voluntarily during such period without the written consent of a majority
of the Board of Directors. Following the applicable period set forth above,
Indemnitee agrees to continue to serve in such capacity at the will of the
Company (or under separate agreement, if such agreement exists) so long as he or
she is duly appointed or elected and qualified in accordance with the applicable
provisions of the bylaws of the Company or any subsidiary of the Company or
until such time as he or she tenders his or her resignation in writing. Nothing
contained in this Agreement is intended to create in Indemnitee any right to
continued employment.
2. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the
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fact that Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, ERISA excise taxes or penalties, fines and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) Proceedings by or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, to the fullest extent permitted by law, amounts
paid in settlement (if such settlement is approved in advance by the Company,
which approval shall not be unreasonably withheld), in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and its shareholders, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company in the performance of
Indemnitee's duty to the Company and its shareholders unless and only to the
extent that the court in which such action or suit is or was pending shall
determine upon application that, in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for expenses and then
only to the extent that the court shall determine.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 2 or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
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3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 2(a) or (b) hereof (but not amounts actually paid in settlement of any
such action, suit or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee within twenty (20) days following delivery of a written
request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly addressed;
otherwise notice shall be deemed received when such notice shall actually be
received by the Company. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
Section 2 shall be made no later than forty-five (45) days after receipt of the
written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company's Articles of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company within
forty-five (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees) of bringing such action.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action, suit or
proceeding in advance of its final disposition) that Indemnitee has not met the
standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to subsection 3(a) unless and
until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
shareholders) that Indemnitee has not
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<PAGE> 4
met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ his or her counsel in any such proceeding at
Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
4. Additional Indemnification Rights, Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule which
expands the right of a California corporation to indemnify a member of its board
of directors, an officer or other corporate agent, such changes shall
automatically become part of Indemnitee's rights, and Company's obligations,
under this Agreement. In the event of any change in any applicable law, statute
or rule which narrows the right of a California corporation to indemnify a
member of its board of directors or an officer, such changes, to the extent not
otherwise required by such law, statute or rule to be applied to this Agreement
shall have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Articles of Incorporation, its Bylaws, any agreement, any
vote of shareholders or disinterested Directors, the Corporation Law of the
State of California, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action
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taken or not taken while serving in an indemnified capacity even though he or
she may have ceased to serve in such capacity at the time of any action, suit or
other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, ERISA excise taxes or penalties, fines or penalties
actually or reasonably incurred by him in the investigation, defense, appeal or
settlement of any civil or criminal action, suit or proceeding, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such expenses, judgments, fines or penalties to
which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from time
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.
8. Severability. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
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9. Exceptions. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California General Corporation Law, but such indemnification
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors has approved the initiation or bringing of such suit.
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of amounts deemed profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar federal, state, local or
successor statute.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "COMPANY"
shall include any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that if Indemnitee is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "OTHER
ENTERPRISES" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "SERVING AT THE REQUEST OF THE COMPANY" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants
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<PAGE> 7
and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to
have acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
(c) For purposes of this Agreement, references to "SUBSIDIARY" shall
mean any corporation of which more than 50% of the outstanding voting securities
are owned directly or indirectly by the Company, by the Company and one or more
other subsidiaries, or by one or more other subsidiaries.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Costs, Expenses and Attorneys' Fees. In the event that any action is
instituted by Indemnitee under this Agreement to enforce or interpret any of the
terms hereof, Indemnitee shall be entitled to be paid all court costs and
expenses, including reasonable attorneys' fees, incurred by Indemnitee with
respect to such action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
as a basis for such action were not made in good faith or were frivolous. In the
event of an action instituted by or in the name of the Company under this
Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
14. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and received by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
16. Choice of Law. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of California, as applied to
contracts between California residents entered into and to be performed entirely
within California.
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17. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
to effectively bring suit to enforce such rights.
18. Entire Agreement, Modification and Waiver. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof. All prior negotiations, agreements and understandings between the
parties with respect thereto are superseded hereby. This Agreement may not be
modified, amended or terminated except by an instrument in writing signed by or
on behalf of the parties hereto. No waiver of any provision of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar); nor shall such waiver constitute a continuing waiver.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ACCELGRAPHICS, INC.
By:_________________________________
Title:______________________________
Address: 1942 Zanker Road
San Jose, CA 95112
AGREED TO AND ACCEPTED:
INDEMNITEE:
Indemnitee
- ------------------------------
(type name)
- ------------------------------
(signature)
Address
(address)
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Exhibit 10.6
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of February
___, 1997 by and between CompanyName, a Delaware corporation (the "Company"),
and IndemniteeName (the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Company and Indemnitee further recognize
the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and agents of the Company may
not be willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE> 2
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section l(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby undertakes
to repay such amounts advanced only if, and to the extent that, it shall
ultimately be determined that Indemnitee is not entitled to be indemnified by
the Company as authorized hereby. Any advances to be made under this Agreement
shall be paid by the Company to Indemnitee within twenty (20) days following
delivery of a written request therefor by Indemnitee to the Company.
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<PAGE> 3
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company and shall be given in accordance with the provisions of
Section 12(d) below. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 11 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Section 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel
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<PAGE> 4
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at Indemnitee's expense; and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred in the
investigation, defense, appeal or settlement of any civil or criminal action,
suit or proceeding, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion of such expenses,
judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or public policy may override applicable state
law and prohibit the Company from indemnifying its directors and officers under
this Agreement or otherwise. For example, the Company and Indemnitee acknowledge
that the Securities and Exchange Commission (the "SEC") has taken the position
that indemnification is not permissible for
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<PAGE> 5
liabilities arising under certain federal securities laws, and federal
legislation prohibits indemnification for certain ERISA violations. Indemnitee
understands and acknowledges that the Company has undertaken or may be required
in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from time
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
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<PAGE> 6
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement,
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<PAGE> 7
Indemnitee shall be entitled to be paid all court costs and expenses, including
attorneys' fees, incurred by Indemnitee in defense of such action (including
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) NOTICES. Any notice, demand or request required or permitted to
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
to effectively bring suit to enforce such rights.
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<PAGE> 8
[Signature Page Follows]
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<PAGE> 9
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
Company Name
By: ___________________________________
Title: ___________________________________
Address: Company Address1
Company Address2
AGREED TO AND ACCEPTED:
Indemnitee Name
(Signature)
Address: Indemnitee Address1
Indemnitee Address2
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<PAGE> 1
Exhibit 10.7
AMENDED AND RESTATED
RIGHTS AGREEMENT
This Amended and Restated Rights Agreement (the "AGREEMENT") is entered
into as of July 1, 1996, by and among AccelGraphics, Inc., a California
corporation (the "COMPANY"), the holders of the Company's Series A Preferred
Stock (the "SERIES A HOLDERS") as set forth on Exhibit A attached hereto, the
holders of the Company's Series B Preferred Stock (the "SERIES B HOLDERS") as
set forth on Exhibit A attached hereto, the holders of certain warrants to
purchase Common Stock and Series A Preferred Stock, respectively (the "PRIOR
WARRANT HOLDERS") as set forth on Exhibit A attached hereto and the holder of
the warrant to purchase Series B Preferred Stock (the "SERIES B WARRANT HOLDER",
and together with the Prior Warrant Holders, the "WARRANT HOLDERS"). The Series
A Holders, the Series B Holders and the Warrant Holders are collectively
referred to as the "HOLDERS."
RECITALS
A. The Company, the Series A Holders, the Series B Holders and the Prior
Warrant Holders have entered into a Rights Agreement (the "PRIOR RIGHTS
AGREEMENT") dated as of June 20, 1995, as amended December 29, 1995 and March 7,
1996, pursuant to which the Company granted such holders certain rights.
B. The Company is a party to a Master Equipment Lease No. 053-0021 of even
date herewith (the "EQUIPMENT LEASE") with the Series B Warrant Holder, pursuant
to which the Company is issuing to the Series B Warrant Holder a warrant to
purchase shares of the Company's Series B Preferred Stock.
C. The Company, the Series A Holders, the Series B Holders and the Prior
Warrant Holders desire to amend and restate the Prior Rights Agreement to
include the Series B Warrant Holders and make certain other changes.
In consideration of the mutual promises and covenants hereinafter set
forth and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
SECTION 1
TERMINATION OF PRIOR RIGHTS
Effective and contingent upon execution of this Agreement by holders of a
majority of the Registrable Securities (as such term is defined in Section 3.2
of the Prior Rights Agreement) and upon the closing of the transactions
contemplated by the Equipment Lease, the Prior Rights Agreement is hereby
declared null and void and is amended and restated in its entirety to read as
set forth in this Agreement, and the Company and the Holders hereby agree to be
bound by the provisions hereof as the sole agreement of the Company and the
Holders with respect to registration rights of the Company's securities and
certain other rights as set forth herein.
<PAGE> 2
SECTION 2
LIMITATIONS ON DISPOSITION
2.1 Limitations on Disposition. Each Holder agrees not to make any
disposition of all or any portion of the Stock or the Registrable Securities (as
defined in Section 3.1(b)) unless and until:
(a) There is then in effect a registration statement under the
Securities Act of 1933, as amended (the "SECURITIES ACT") covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or
(b) (i) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the Securities Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Holder to a constituent shareholder or constituent partner
(including any constituent of a constituent) of the Holder or to any
wholly-owned subsidiary or parent of, or to any corporation or entity that is,
within the meaning of the Securities Act, controlling, controlled by or under
common control with, any such Holder, if the transferee or transferees agree in
writing to be subject to the terms hereof to the same extent as if they were the
Holder hereunder and to reconfirm representations and warranties made by the
Holder in the Series B Purchase Agreement dated as of March 7, 1996 by and among
the Company and the Series B Holders.
SECTION 3
REGISTRATION RIGHTS
3.1 Definitions. As used in this Agreement:
(a) The terms "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the subsequent declaration
or ordering of the effectiveness of such registration statement.
(b) The term "REGISTRABLE SECURITIES" means:
(i) the shares of Common Stock issuable or issued upon
conversion of the Series A Preferred Stock of the Company issued pursuant to the
Series A Preferred Purchase Agreement dated June 20, 1995 (the "SERIES A
PURCHASE AGREEMENT" and together with the Series B Purchase Agreement, the
"PURCHASE AGREEMENT");
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<PAGE> 3
(ii) the shares of Common Stock issuable or issued
upon conversion of the Series A-1 Preferred Stock of the Company issuable or
issued upon conversion of the Series A Preferred Stock of the Company;
(iii) the shares of Common Stock issuable or issued
upon conversion of the Series B Preferred Stock purchased under the Series B
Purchase Agreement (such shares together with the shares of Common Stock
issuable or issued upon conversion of the Series A Preferred Stock of the
Company are referred to hereafter as the "STOCK");
(iv) the shares of Common Stock issuable or issued upon
conversion of the Series B-1 Preferred Stock of the Company issuable or issued
upon conversion of the Series B Preferred Stock of the Company;
(v) the shares of Common Stock issuable or issued upon
exercise of certain warrants issued to Intel Corporation pursuant to the Warrant
Purchase Agreement dated December 29, 1995;
(vi) the shares of Common Stock issuable or issued upon
conversion of the Series A Preferred Stock of the Company issuable or issued
upon exercise of certain warrants issued to Silicon Valley Bank in connection
with a line of credit pursuant to a Business Loan Agreement dated October 11,
1995;
(vii) the shares of Common Stock issuable or issued upon
conversion of the Series B Preferred Stock of the Company issuable or issued
upon exercise of certain warrants issued to Phoenix Leasing Incorporated
pursuant to a Master Equipment Lease No. 053-0021 dated July 1, 1996; and
(viii) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned;
provided, however, that Common Stock or other securities shall only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
(c) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "HOLDER" means any holder of outstanding
Registrable Securities who, subject to the limitations set forth in Section 3.13
below, acquired such
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<PAGE> 4
Registrable Securities in a transaction or series of transactions not involving
any registered public offering.
(e) The term "FORM S-3" means such form under Securities Act
as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the Securities and Exchange Commission ("SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
3.2 Demand Registration.
(a) If the Company shall receive at any time after the earlier
of (i) July 1, 1999, or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or an SEC Rule 145 transaction), a written request from the Holders
of at least a forty percent (40%) majority of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act having an aggregate offering price, before deduction of underwriters
discounts and commissions, of at least $7,500,000, then the Company shall,
within ten (10) days of the receipt thereof, give written notice of such request
to all Holders and shall, subject to the limitations of subsection 3.2(b),
effect as soon as practicable, and in any event within ninety (90) days of the
receipt of such request, the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered within thirty
(30) days of the effective date of such notice delivered by the Company in
accordance with Section 5.5.
(b) If the Holders initiating the registration request
hereunder ("INITIATING HOLDERS") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 3.2 and the
Company shall include such information in the written notice referred to in
subsection 3.2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
3.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 3.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to
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be included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from such underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 3.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
3.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders.
3.3 Piggyback Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
Common Stock or other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a registration
relating either to the sale of securities to participants in a Company stock
option, stock purchase or similar plan or to an SEC Rule 145 transaction, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 5.5, the Company shall,
subject to the provisions of Section 3.8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered.
3.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 3.4, (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an
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aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $500,000; (iii) if the Company shall furnish to the
Holders a certificate signed by the president of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 4.12; (iv) if the Company has, within the
twelve (12)-month period preceding the date of such request, already effected
one (1) registration on Form S-3 for the Holders pursuant to this Section 3.4;
(v) if the Company has, within the one hundred eighty (180)-day period preceding
the date of such request, effected any registration of its securities pursuant
to the Securities Act; or (vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
3.5 Obligations of the Company. Whenever required under this Section
3 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for the earlier of one hundred twenty
(120) days or until the distribution contemplated in the registration statement
has been completed; provided, however, that (i) such one hundred twenty
(120)-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such one
hundred twenty (120)-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are sold,
provided that Rule 415, or any successor rule under the Securities Act, permits
an offering on a continuous or delayed basis, and the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (A) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (B) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (A) and (B)
above to be contained in periodic reports filed pursuant to Sections 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "1934 ACT"), in the
registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
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<PAGE> 7
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered pursuant
to this Section 3 to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to this Section 3 and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 3, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 3, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities
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<PAGE> 8
3.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 3 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
3.7 Expenses of Registrations. All expenses other than underwriting
discounts and commissions and the fees and disbursements of one special counsel
for the selling Holders, if any, incurred in connection with registrations,
filings or qualifications pursuant to this Section 3, including (without
limitation), all registration, filing and qualification fees, printers and
accounting fees, fees and disbursements of counsel for the Company shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
3.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all Participating Holders shall bear such expenses); provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 3.2.
3.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 3.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities which the underwriters believe will not
jeopardize the success of the offering (the "SELLING SHAREHOLDER SECURITIES"),
provided, however, that the Selling Shareholder Securities shall first be
allocated among the requesting Holders pro rata according to the total amounts
of Registrable Securities entitled to be included in such offering by such
requesting Holders and then among all other holders of securities requesting and
legally entitled to include securities in such offering pro rata based on the
total amount of such securities entitled to be included in such offering by such
holders and provided, further, that (i) in no event shall the amount of
Registrable Securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities, in which case all of the Registrable Securities may be
excluded if, in either case, the underwriters make the determination described
above and no other shareholder's securities are included, or (ii)
notwithstanding (i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 3.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and
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<PAGE> 9
shareholders of such holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling shareholder," and any
pro rata reduction with respect to such selling shareholder shall be based upon
the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such selling shareholders.
3.9 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
3.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the 1934 Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities 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 therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the 1934 Act or any state securities law; and the Company will pay as
incurred to each such Holder, underwriter or controlling person, any 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 subsection 3.10(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), 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 which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities 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
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<PAGE> 10
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 3.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 3.10(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 Holder, which consent shall not be unreasonably
withheld, provided, further, that in no event shall any indemnity under this
Section 3.10(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 3.10 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 3.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between 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 prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 3.10, 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
3.10.
(d) If the indemnification provided for in this Section 3.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, will contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
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(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement will control.
(f) The obligations of the Company and Holders under this
Section 3.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 3, and otherwise.
3.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the 1934
Act (at any time after it has become subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
3.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder only to a (i) transferee or assignee acquiring not less
than 150,000 shares of Registrable Securities (as presently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits and the like) or (ii) any wholly-owned subsidiary or parent of, or
to any
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corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with, any such Holder,
provided the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; and provided, further, that such assignment shall be effective only if
(a) the transferee or assignee agrees to be bound by the obligations of a Holder
under this Agreement and (b) immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act.
3.13 "Market Stand-Off" Agreement. The Holder hereby agrees that
during the 180-day period following the effective date of the registration
statement filed by the Company with respect to its initial public offering under
the Securities Act, it shall not, to the extent requested by the Company and
such underwriter, sell or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any Common Stock of the Company held by it at
any time during such period except Common Stock included in such registration;
provided, however, that the obligations under this Section 3.13 are conditioned
upon the officers and the directors of the Company entering into similar
agreements.
To enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Purchaser (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
3.14 Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Section 3 (a) after ten (10) years
following the consummation of the Company's initial sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
on Form S-1 under the Securities Act (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or a SEC Rule 145 transaction)
or (b) at such time following the Company's initial public offering and for so
long as such Holder may sell all of such Holder's Registrable Securities (i)
under Rule 144(k) or (ii) in any one (1) three-month period pursuant to Rule 144
(or such successor rule as may be adopted).
SECTION 4
ADDITIONAL RIGHTS
4.1 Right of First Offer. Subject to the terms and conditions
specified in this Section 4.1, the Company hereby grants to each Holder, so long
as such Holder holds not less than 150,000 shares of Registrable Securities held
thereby (the "RIGHTHOLDER"), a right of first offer with respect to future sales
by the Company of its New Securities (as hereinafter defined). For purposes of
this Section 4.1, the term Rightholder includes any partners, shareholders or
affiliates of the Rightholder. The Rightholder shall be entitled to apportion
the right of first offer hereby granted among itself and its partners,
shareholders and affiliates in such proportions as it deems appropriate.
(a) In the event the Company proposes to issue New Securities,
it shall give the Rightholder written notice (the "NOTICE") of its intention
stating (i) a description of the
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New Securities it proposes to issue, (ii) the number of shares of New Securities
it proposes to offer, (iii) the price per share at which, and other terms on
which, it proposes to offer such New Securities and (iv) the number of shares
that the Rightholder has the right to purchase under this Section 4.1, based on
the Rightholder's Percentage (as defined in Subsection 4.1(d)(ii)).
(b) Within forty-five (45) days after the Notice is given (in
accordance with Section 5.5), the Rightholder may elect to purchase, at the
price specified in the Notice, up to the number of shares of the New Securities
proposed to be issued that the Rightholder has the right to purchase as
specified in the Notice. An election to purchase shall be made in writing and
must be given to the Company within such forty-five (45)-day period (in
accordance with Section 5.5). The closing of the sale of New Securities by the
Company to the participating Rightholder upon exercise of its rights under this
Section 4.1 shall take place simultaneously with the closing of the sale of New
Securities to third parties.
(c) The Company shall have ninety (90) days after the last
date on which the Rightholder's right of first offer lapsed to enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within forty-five days from the execution thereof) to sell
the New Securities which the Rightholder did not elect to purchase under this
Section 4.1, at or above the price and upon terms not materially more favorable
to the purchasers of such securities than the terms specified in the initial
Notice given in connection with such sale. In the event the Company has not
entered into an agreement to sell the New Securities within such ninety day
period (or sold and issued New Securities in accordance with the foregoing
within forty-five days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities without first offering such New
Securities to the Rightholder in the manner provided in this Section 4.1.
(d) (i) "NEW SECURITIES" shall mean any shares of, or
securities convertible into or exercisable for any shares of, any class of the
Company's capital stock; provided that "New Securities" does not include: (A)
securities issued pursuant to the acquisition of another business entity by the
Company by merger, purchase of substantially all of the assets of such entity,
or other reorganization whereby the Company owns not less than a majority of the
voting power of such entity; (B) shares, or options to purchase shares, of the
Company's Common Stock and the shares of Common Stock issuable upon exercise of
such options, issued pursuant to any arrangement approved by the Board of
Directors to employees, officers and directors of, or consultants, advisors or
other persons performing services for, the Company, (C) shares of the Company's
Common Stock or Preferred Stock of any series issued in connection with any
stock split, stock dividend or recapitalization of the Company; (D) Common Stock
issued upon exercise of warrants, options or convertible securities if the
issuance of such warrants, options or convertible securities was a result of the
exercise of the right of first offer granted under this Section 4.1 or was
subject to the right of first offer granted under this Section 4.1; (E) capital
stock or warrants or options for the purchase of shares of capital stock issued
by the Company to a lender in connection with any loan or lease financing or
technology acquisition transaction approved by the Board of Directors of the
Company; and (F) securities sold to the public in an offering pursuant to a
registration statement filed with the Securities and Exchange Commission under
the Securities Act.
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(ii) The applicable "PERCENTAGE" for the Rightholder
shall be the number of shares of New Securities calculated by dividing (A) the
total number of shares of Common Stock owned by the Rightholder (assuming
conversion of all outstanding shares of Preferred Stock) by (B) the total number
of shares of Common Stock outstanding at the time the Notice is given (assuming
conversion of all outstanding shares of Preferred Stock).
(e) The right of first offer granted under this Section 4.1
shall not apply to and shall expire upon the consummation of the Company's sale
of its Common Stock in a bona fide, firm commitment underwriting pursuant to a
registration statement on Form S-1 under the Securities Act (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction).
(f) The right of first offer granted under this section may be
assigned by the Rightholder to a transferee or assignee of the Rightholder's
shares of the Company's stock acquiring at least 150,000 of the Rightholder's
shares of the Company's Common Stock (treating all shares of Preferred Stock for
this purpose as though converted into Common Stock) (equitably adjusted for any
stock splits, subdivision stock dividends, changes, combinations or the like).
In the event that the Rightholder shall assign its right of first offer pursuant
to this Section 4.1 in connection with the transfer of less than all of its
shares of the Company's stock, the Rightholder shall also retain its right of
first offer to the extent then applicable under this Section 4.1.
4.2 Information Rights; Observer Rights.
(a) So long as Holder holds at least 375,000 shares of
Registrable Securities, the Company shall deliver to each Holder:
(i) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company as of the end of
such year, and a schedule as to the sources and applications of funds for such
year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(ii) within twenty (20) days of the end of each month,
an unaudited income statement and schedule as to the sources and application of
funds and balance sheet and comparison to budget for and as of the end of such
month, in reasonable detail;
(iii) as soon as practicable, but in any event thirty
(30) days after the end of each fiscal quarter, a report on financial and
operational highlights; and
(iv) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Purchaser or any assignee of the Purchaser may from time to time request,
provided, however, that the Company shall not be
-14-
<PAGE> 15
obligated to provide information which the Board of Directors deems in good
faith to be proprietary.
(b) The Company shall permit each Holder holding not less than
375,000 shares of Registrable Securities, at such Holder's expense, to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by such Holder; provided,
however, that the Company shall not be obligated pursuant to this subsection
4.2(c) to provide access to any information which it reasonably considers to be
a trade secret or similar confidential information.
(c) The covenants set forth in this Section 4.2 shall
terminate as to all Holders and be of no further force or effect immediately
upon the consummation of the Company's initial sale of its Common Stock in a
bona fide, firm commitment underwriting pursuant to a registration statement on
Form S-1 under the Securities Act (other than a registration statement relating
either to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction).
(d) So long as Woodside Fund III, L.P. or its affiliated
entity holds 375,000 shares of Registrable Securities, it shall have the right
to have a single representative attend all meetings of the Company's Board of
Directors in a non-voting capacity and, in this respect, the Company shall give
such representative copies of all notices, minutes, consents and other materials
that it provides to its directors; provided, however, (i) that such
representative shall agree to hold in confidence and trust and to act in the
best interest of the Company with respect to all information so provided; (ii)
that the Company reserves the right to withhold any information and to exclude
such representative from any meeting, or portion thereof, if the Board of
Directors determines in good faith that access to such information or attendance
at such meeting could adversely affect the Company; and (iii) that in no event
shall the failure to provide the notice described above invalidate in any way
any action taken at a meeting of the Company's Board of Directors.
4.3 Employee and Other Stock Arrangements. Each acquisition of any
shares of capital stock of the Company or any option or right to acquire any
shares of capital stock of the Company by an employee, consultant, officer or
director of the Company will be conditioned upon the execution and delivery by
the Company and such employee, consultant, officer or director of an agreement
substantially in the form approved by the Board of Directors of the Company
providing, among other things, that such shares, when granted to an employee,
consultant, officer or director, shall be subject to vesting at the rate of
1/8th of the shares granted after six (6) months from the date of grant and
1/48th of the shares granted monthly thereafter, unless otherwise approved by
the Board of Directors.
4.4 Key Person Life Insurance. The Company shall have in full force
and effect term life insurance, payable to the Company, on the lives of Nancy
Bush, Jeffrey W. Dunn, Greg Milliken, Ralph Nichols and Greg Walsh,
respectively, in the amount of $250,000 on each such person's life, unless
otherwise determined by the Board of Directors.
-15-
<PAGE> 16
4.5 Debt. The Company shall be required to obtain the consent of a
majority of the Board of Directors before issuing any debt security, including,
without limitation, borrowings from any bank or financial institution.
4.6 Qualified Small Business. The Company will use reasonable
efforts to comply with the reporting and recordkeeping requirements of Section
1202 of the Internal Revenue Code of 1986, as amended and any regulations
promulgated thereunder, and agrees not to repurchase any stock of the Company if
such repurchase would cause such Stock not to so qualify as "Qualified Small
Business Stock."
4.7 Real Property Holding Corporation. The Company covenants that it
will operate in a manner such that it will not become a "United States real
property holding corporation" as that term is defined in Section 897(c)(2) of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
30 days of a request from an Investor or any of its partners, the Company will
inform the requesting party, in the manner set forth in Reg.
Section 1.897-2(h)(1)(iv) or any supplementary or successor provision thereto,
whether that party's interest in the Company constitutes a United States real
property interest (within the meaning of Internal Revenue Code Section 897(c)(1)
and the regulations thereunder) and whether the Company has provided to the
Internal Revenue Service all required notices as to its USRPHC status.
4.8 Exon-Florio. The Company shall cooperate with Kubota Corporation
with respect to matters pertaining to Exon-Florio.
4.9 Termination. The covenants set forth in Sections 4.1 through 4.8
shall terminate as to all Holders and be of no further force or effect
immediately upon the consummation of the Company's initial sale of its Common
Stock in a bona fide, firm commitment underwriting pursuant to a registration
statement on Form S-1 under the Securities Act (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction).
SECTION 5
MISCELLANEOUS
5.1 Assignment. Subject to the transfer restrictions set forth
above, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
-16-
<PAGE> 17
5.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements entered into
solely between residents of, and to be performed entirely within, such state.
5.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices.
(a) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the Holders to their respective addresses as set forth under their name on
Exhibit A attached hereto, with copies to Cooley, Godward, Castro, Huddleson &
Tatum, 3000 Sand Hill Road, Building 3, Suite 230, Menlo Park, California,
94025, Attention: Craig Dauchy and Graham & James, 5 Palo Alto Square, Suite
1000, 3000 El Camino Real, Palo Alto, CA 94306-2119, Attention: Robert Patterson
and, if to the Company, to AccelGraphics, Inc., 1942 Zanker Road, San Jose,
California 94112-9704, Attention: President, with copies to Venture Law Group,
2800 Sand Hill Road, Menlo Park, California, 94025, Attention: Michael W. Hall.
(b) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be sent by airmail, return receipt requested, or by telex or
telecopy (facsimile) with confirmation of receipt, and shall be deemed to be
given or made when receipt is so confirmed.
(c) Any party may, by written notice to the other, alter its
address or respondent, and such notice shall be considered to have been given
five (5) days after the airmailing, telexing or telecopying thereof.
5.6 Attorney's Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
5.7 Amendment and Waiver. Any provision of this Agreement may be
amended with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Securities, and the Company. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders of Registrable Securities, or agree to accept alternatives to such
performance, without obtaining the consent of any Holder of Registrable
Securities. In the event that an underwriting agreement is entered into between
the Company and any Holder, and such
-17-
<PAGE> 18
underwriting agreement contains terms differing from this Agreement, as to any
such Holder the terms of such underwriting agreement shall govern.
5.8 Effect of Amendment or Waiver. Each Holder and its successors
and assigns acknowledge that by the operation of Sections 2 and 5.7 hereof the
holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate all rights pursuant to this Agreement.
5.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be interpreted as
if such provision were so excluded and shall be enforceable in accordance with
its terms.
5.10 Rights of Holders. Each holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
5.11 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any of the Stock, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of such Holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
5.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any all other written or oral agreements existing
between the parties hereto are expressly cancelled.
[Signature Page Follows]
-18-
<PAGE> 19
IN WITNESS WHEREOF, this Rights Agreement is hereby executed as of the
date first written above.
COMPANY:
ACCELGRAPHICS, INC.
By: /s/ Jeffrey W. Dunn
-----------------------------------------
Jeffrey W. Dunn, President
HOLDERS:
ADVANCED TECHNOLOGY VENTURES IV, L.P.
By: ATV Associates IV, L.P.
Name: /s/ Jos C. Henkens
---------------------------------------
(print)
Title: General Partner
--------------------------------------
ASSET MANAGEMENT ASSOCIATES
1996, L.P.
By: AMC Partners 96, L.P.,
its General Partner
Name: /s/ W Ferrel Sanders
---------------------------------------
(print)
Title:
-------------------------------------
ASSOCIATED VENTURE INVESTORS III, L.P.
By: AVI Management Partners III, L.P.
Name: /s/ Peter L. Wolken
---------------------------------------
(print)
Title: General Partner
--------------------------------------
-19-
<PAGE> 20
AVI CAPITAL, L.P.
By: AVI Capital Management, L.P.,
its General Partner
Name: /s/ Peter L. Wolken
---------------------------------------
(print)
Title: General Partner
--------------------------------------
AVI PARTNERS GROWTH FUND II, L.P.
By: AVI Management Partners III, L.P.,
its General Partner
Name: /s/ Peter L. Wolken
---------------------------------------
(print)
Title: General Partner
--------------------------------------
AVI SILICON VALLEY PARTNERS, L.P.
By: AVI Management Partners III, L.P.
Name: /s/ Peter L. Wolken
---------------------------------------
(print)
Title: General Partner
--------------------------------------
INTEL CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
(print)
Title:
--------------------------------------
-20-
<PAGE> 21
KUBOTA CORPORATION
By: /s/ Keizo Yamada
-----------------------------------------
Name: Keizo Yamada
---------------------------------------
(print)
Title: General Manager
--------------------------------------
PIDWELL FAMILY LIVING TRUST
DATED 6/25/87
By: /s/ David W. Pidwell
-----------------------------------------
Name: David W. Pidwell
---------------------------------------
(print)
Title: Trustee
--------------------------------------
PHOENIX LEASING INCORPORATED
By: /s/ N.H. Nelson
-----------------------------------------
Name: N.H. Nelson
---------------------------------------
(print)
Title: Vice President
--------------------------------------
REES / SOURCE VENTURES, LIMITED
PARTNERSHIP #9
By: /s/ Kenneth R. Rees
-----------------------------------------
Name: Kenneth R. Rees
---------------------------------------
(print)
Title: Vice President
--------------------------------------
-21-
<PAGE> 22
ROBERT F. KIBBLE, TRUSTEE FOR THE ROBERT
F. KIBBLE LIVING TRUST, DATED DECEMBER
28, 1990
By: /s/ Robert F. Kibble
-----------------------------------------
Name: Robert F. Kibble
---------------------------------------
(print)
Title: Trustee to the Robert F. Kibble
Living Trust
-22-
<PAGE> 23
SILICON VALLEY BANK
By:
-----------------------------------------
Name:
---------------------------------------
(print)
Title:
--------------------------------------
STF II, L.P.
c/o IndoSuez Ventures
By: /s/ David E. Gold
-----------------------------------------
Name: David E. Gold
---------------------------------------
(print)
Title: Investment Manager
--------------------------------------
VLG INVESTMENTS 1995
By: /s/ Joshua Pickus
-----------------------------------------
Name: Joshua Pickus
---------------------------------------
(print)
Title: Partner
--------------------------------------
VLG INVESTMENTS 1996
By: /s/ Joshua Pickus
-----------------------------------------
Name: Joshua Pickus
---------------------------------------
(print)
Title: Partner
--------------------------------------
-23-
<PAGE> 24
VLG RETIREMENT SAVINGS
PLAN TRUST ACCOUNT FBO MICHAEL W. HALL
By: /s/ Jon C. Richards
-----------------------------------------
Name: Jon C. Richards
---------------------------------------
(print)
Title: Trustee
--------------------------------------
WOODSIDE FUND III, L.P.
By: Woodside Partners III, L.P.,
its General Partner
Name: /s/ Robert E. Larson
---------------------------------------
(print)
Title: Robert E. Larson
--------------------------------------
--------------------------------------------
Michael Au
/s/ Richard W. Dunn
--------------------------------------------
Richard W. Dunn
/s/ Lew Epstein
--------------------------------------------
Lew Epstein
/s/ Robert G. Pearson
--------------------------------------------
Robert G. Pearson
/s/ Kalevi Puonti
--------------------------------------------
Kalevi Puonti
/s/ Edmund S. Ruffin, Jr.
--------------------------------------------
Edmund S. Ruffin, Jr.
-24-
<PAGE> 25
EXHIBIT A
HOLDERS
<TABLE>
<CAPTION>
SERIES A HOLDERS:
<S> <C>
Advanced Technology Ventures IV Associated Venture Investors III, L.P.
c/o ATV Associates IV, L.P. c/o AVI Management Partners III, L.P.
485 Ramona Street, Suite 200 One First Street, Suite 12
Palo Alto, CA 94031 Los Altos, CA 94022
Attn: Jos Henkens Telephone: (415) 949-9855
FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner
AVI Capital, L.P. AVI Partners Growth Fund
c/o AVI Management Partners c/o AVI Management Partners III, L.P.
One First Street, Suite 12 One First Street, Suite 12
Los Altos, CA 94022 Los Altos, CA 94022
Telephone: (415) 949-9855 Telephone: (415) 949-9855
FAX: (415) 949-8510 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner Attn: Peter L. Wolken, General Partner
AVI Silicon Valley Partners, L.P. Robert F. Kibble Trust
c/o AVI Management Partners III, L.P. 31 Eugenia Lane
One First Street, Suite 12 Woodside, CA 94062
Los Altos, CA 94022 Telephone: (415) 365-6061
Telephone: (415) 949-9855 FAX: (415) 361-8783
FAX: (415) 949-8510 Attn: Robert F. Kibble
Attn: Peter L. Wolken, General Partner
Kubota Corporation Rees/Source Ventures, Limited
2372A Qume Drive Partnership #9
San Jose, CA 95131, 4133 Mohr Ave., Suite A
Telephone: (408) 474-0216 Pleasanton, CA 94566
FAX: (408) 474-0207 Attn: Robert Rees
Attn: Keizo Yamada
STF II, L.P. VLG Investments 1995
c/o Indosuez Ventures 2800 Sand Hill Road
2180 Sand Hill Road, Suite 450 Menlo Park, CA 94025
Menlo Park, CA 94025 Telephone: (415) 854-4488
Telephone: (415) 854-0587 FAX: (415) 854-1121
FAX: (415) 323-5561 Attn: Joshua Pickus
Attn: David E. Gold
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
VLG Retirement Savings Plan Trust Woodside Fund III, L.P.
Account FBO Michael W. Hall c/o Woodside Partners III, L.P.
Venture Law Group 850 Woodside Drive
2800 Sand Hill Road Woodside, CA 94062
Menlo Park, CA 94025 Telephone: (415) 368-5545
Telephone: (415) 854-4488 FAX: (415) 368-2416
FAX: (415) 854-1121 Attn: Robert E. Larson
<CAPTION>
SERIES B HOLDERS
<S> <C>
Advanced Technology Ventures IV Asset Management Associates 1996, L.P.
c/o ATV Assocites IV, L.P. c/o Asset Management Company
485 Ramona Street, Suite 200 2275 East Bayshore Rd., Suite 150
Palo Alto, CA 94031 Palo Alto, CA 94303
Attn: Jos Henkens Telephone: (415) 494-7400
FAX: (415) 856-1826
Attn: W. Ferrell Sanders
Associated Venture Investors III, L.P. AVI Capital, L.P.
c/o AVI Management Partners III, L.P. c/o AVI Management Partners
One First Street, Suite 12 One First Street, Suite 12
Los Altos, CA 94022 Los Altos, CA 94022
Telephone: (415) 949-9855 Telephone: (415) 949-9855
FAX: (415) 949-8510 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner Attn: Peter L. Wolken, General Partner
AVI Partners Growth Fund AVI Silicon Valley Partners, L.P.
c/o AVI Management Partners III, L.P. c/o AVI Management Partners III, L.P.
One First Street, Suite 12 One First Street, Suite 12
Los Altos, CA 94022 Los Altos, CA 94022
Telephone: (415) 949-9855 Telephone: (415) 949-9855
FAX: (415) 949-8510 FAX: (415) 949-8510
Attn: Peter L. Wolken, General Partner Attn: Peter L. Wolken, General Partner
Robert F. Kibble Trust Kubota Corporation
31 Eugenia Lane 2372A Qume Drive
Woodside, CA 94062 San Jose, CA 95131
Telephone: (415) 365-6061 Telephone: (408) 474-0216
FAX: (415) 361-8783 FAX: (408) 474-0207
Attn: Robert F. Kibble Attn: Keizo Yamada
Rees/Source Ventures, Limited STF II, L.P.
Partnership #9 c/o Indosuez Ventures
4133 Mohr Ave., Suite A 2180 Sand Hill Road, Suite 450
Pleasanton, CA 94566 Menlo Park, CA 94025
Attn: Robert Rees Telephone: (415) 854-0587
FAX: (415) 323-5561
Attn: David E. Gold
</TABLE>
<PAGE> 27
VLG Retirement Savings Plan Trust Woodside Fund III, L.P.
Account FBO Michael W. Hall c/o Woodside Partners III, L.P.
Venture Law Group 850 Woodside Drive
2800 Sand Hill Road Woodside, CA 94062
Menlo Park, CA 94025 Telephone: (415) 368-5545
Telephone: (415) 854-4488 FAX: (415) 368-2416
FAX: (415) 854-1121 Attn: Robert E. Larson
Michael Au Richard W. Dunn
Moore Capital 27 River Road
1251 Avenue of the Americas Weston, CT 06883
New York, NY 10020
Lew Epstein Robert G. Pearson
12759 Saratoga Woods Circle c/o Pearson Strategic Consulting
Saratoga, CA 95070 275 Apricot Lane
Mountain View, CA 94040
Pidwell Family Living Trust dated Kalevi Puonti
6/25/87 Rue Du Pommier 12
c/o David W. Pidwell 2000 Neuchatel
20628 Vickery Lane Switzerland
Saratoga, CA 95070
Telephone: (408) 867-6004
FAX: (408) 867-5049
Edmund S. Ruffin, Jr. VLG Investments 1996
c/o Venture Law Group c/o Venture Law Group
2800 Sand Hill Road 2800 Sand Hill Road
Menlo Park, CA 94025 Menlo Park, CA 94025
Telephone: (415) 854-4488 Telephone: (415) 854-4488
FAX: (415) 854-1121 FAX: (415)854-1121
Attn: Joshua Pickus
WARRANT HOLDERS:
Intel Corporation
2200 Mission College Blvd.
Mail Stop SC4-210
Santa Clara, CA 95052-8119
Attn: Treasurer
Silicon Valley Bank
3000 Sand Hill Road
Building 4, Suite 150
Menlo Park, CA 94025
Attn: Alida Buchanan
Phoenix Leasing Incorporated
2401 Kerner Blvd.
San Rafeal, CA 94901
Attn: Margaret Peterson
<PAGE> 1
EXHIBIT 10.8
PEERY/ARRILLAGA
January 31, 1995
Mr. Jeffrey Dunn
President and CEO
ACCELGRAPHICS, INC.
1942 Zanker Road
San Jose, CA 95112
RE: COMMENCEMENT OF LEASE
Gentlemen:
This letter will confirm our agreement relative to the Commencement Date of the
Lease Agreement dated December 16, 1994 by and between John Arrillaga and
Richard T. Peery Separate Property Trusts, as Landlord, and AccelGraphics, Inc.,
a California corporation, as Tenant, for approximately 12,833 +/- square feet of
space located at 1942 Zanker Road, San Jose, California.
Notwithstanding anything to the contrary contained in said Lease Agreement, it
is agreed that said Lease shall commence effective February 1, 1995 and
terminate three years and two months later on March 31, 1998. It is also agreed
that the Basic Rent Schedule as provided for in Paragraph 43 of the Lease
Agreement shall remain unchanged.
The latest date Tenant may exercise its Option to Extend, as specified in
Paragraph 51 of your Lease, shall remain September 30, 1997.
Please execute this letter in the space provided below, indicating your
agreement with the foregoing, and return all copies to us for our execution. We
will return a fully executed original for your records.
Respectfully yours,
PEERY/ARRILLAGA
By /s/ John Arrillaga
-------------------------
John Arrillaga
AGREEMENT:
ACCELGRAPHICS, INC.
a California corporation
By /s/ Jeffrey W. Dunn
---------------------------------------
Jeffrey W. Dunn, President and CEO
<PAGE> 2
PEERY/ARRILLAGA
January 20, 1995
Mr. Jeffrey Dunn
ACCELGRAPHICS, INC.
2630 Walsh Avenue
Santa Clara, CA 95050
RE: LEASE AGREEMENT DATED DECEMBER 16,1994 BETWEEN JOHN ARRILLAGA AND
RICHARD T. PEERY SEPARATE PROPERTY TRUSTS, AS LANDLORD, AND
ACCELGRAPHICS, INC., AS TENANT FOR LEASED PREMISES LOCATED AT 1942
ZANKER ROAD, SAN JOSE, CALIFORNIA
Dear Jeffrey,
Exhibit A to the aforementioned document is enclosed for your retention.
If you have any questions regarding this document please call me at
408/980-0130.
Sincerely,
/s/ Sandra Lemmer
Sandra Lemmer
Property Manager
Enclosure
<PAGE> 3
PEERY/ARRILLAGA
February 14, 1995
Mr. Jeffrey Dunn
ACCELGRAPHICS, INC.
1942 Zanker Road
San Jose, CA 95112
RE: COMMENCEMENT LETTER DATED JANUARY 31,1995 BETWEEN JOHN ARRILLAGA AND
RICHARD T. PEERY SEPARATE PROPERTY TRUSTS, AS LANDLORD, AND
ACCELGRAPHICS, INC., AS TENANT FOR LEASED PREMISES LOCATED AT 1942
ZANKER ROAD, SAN JOSE, CALIFORNIA
Dear Jeffrey,
The aforementioned document is enclosed for your retention.
If you have any questions regarding this document please call me at
408/980-0130.
Sincerely,
Sandra Lemmer
Property Manager
Enclosure
<PAGE> 4
LEASE AGREEMENT
BLDG: Z/B 3
OWNER: 500
PROP: 153
UNIT: 1942
TENANT: 15304
THIS LEASE, made this 16th day of December 1994 between JOHN ARRILLAGA, Trustee,
or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SEPARATE PROPERTY
TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter
called Landlord, and ACCELGRAPHICS, INC., a California Corporation, hereinafter
called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord
those certain premises (the "Premises") outlined in red on Exhibit "A", attached
hereto and incorporated herein by this reference thereto more particularly
described as follows:
A portion of that certain 30,018+/- square foot, one-story
building located at 1942 Zanker Road, San Jose, California, 95112
consisting of approximately 12,833+/- square feet of space. Said
Premises is more particularly shown within the area outlined in
Red on Exhibit A. The entire parcel, of which the Premises is a
part, is shown within the area outlined in Green on Exhibit A
attached hereto. The Premises shall be improved as shown on
Exhibit B to be attached hereto, and, subject to Paragraph 46, is
leased in its present condition, and in the configuration as
shown in Red on Exhibit B to be attached hereto.
As used herein the Complex shall mean and include all of the land outlined in
Green and described in Exhibit "A" attached hereto, and all of the buildings,
improvements, fixtures and equipment now or hereafter situated on said land.
Said letting and hiring is upon and subject to the terms. covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
1. USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, research and development, storage and warehousing,
and other uses necessary for Tenant to conduct Tenant's business, provided that
such uses shall be in accordance with all applicable governmental laws and
ordinances and for no other purpose. Tenant shall not do or permit to be done in
or about the Premises or the Complex nor bring or keep or permit to be brought
or kept in or about the Premises or the Complex anything which is prohibited by
or will in any way increase the
<PAGE> 5
existing rate of (or otherwise affect) fire or any insurance covering the
Complex or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Complex or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises or the Complex which will in any way obstruct or interfere
with the rights of other tenants or occupants of the Complex or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises or the Complex. No sale by auction
shall be permitted on the Premises. Tenant shall not place any loads upon the
floors, walls, or ceiling, which endanger the structure, or place any harmful
fluids or other materials in the drainage system of the building, or overload
existing electrical or other mechanical systems. No waste materials or refuse
shall be dumped upon or permitted to remain upon any part of the Premises or
outside of the building in which the Premises are a part, except in trash
containers placed inside exterior enclosures designated by Landlord for that
purpose or inside of the building proper where designated by Landlord. No
materials, supplies, equipment, finished products or semi-finished products, raw
materials or articles of any nature shall be stored upon or permitted to remain
outside the Premises or on any portion of common area of the Complex. No
loudspeaker or other device, system or apparatus which can be heard outside the
Premises shall be used in or at the Premises without the prior written consent
of Landlord. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless
against any loss, expense, damage, attorneys' fees, or liability arising out of
failure of Tenant to comply with any applicable law regulating Tenant's use of
the Premises. Tenant shall comply with any covenant, condition, or restriction
("CC&R's") affecting the Premises. The provisions of this paragraph are for the
benefit of Landlord only and shall not be construed to be for the benefit of any
tenant or occupant of the Complex. There are no CC&R's affecting the Premises at
the time of Lease execution. In the event CC&R's are subsequently implemented,
Landlord shall provide a copy of said CC&R's to Tenant.
2. TERM*
A. The term of this Lease shall be for a period of THREE (3) years TWO (2)
months and SEVENTEEN (17) days (unless sooner terminated as hereinafter
provided) and, subject to Paragraphs 2(B) and 3, shall commence on the 15th day
of January, 1995 and end on the 31st day March of 1998.
B. Possession of the Premises shall be deemed tendered and the term of this
Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or, if the governmental agency having jurisdiction
over the area in which the Premises are situated does not issue
certificates of occupancy, then the same number of days after
certification by Landlord's architect or contractor that Landlord's
construction work has been completed; or
(b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or
<PAGE> 6
(c) When the Tenant Improvements have been substantially completed for
Tenant's use and occupancy, in accordance and compliance with Exhibit B
of this Lease Agreement; or
(d) As otherwise agreed in writing.
3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver possession
of said premises to Tenant at the commencement of the said term, as hereinbefore
specified, this Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby; nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage resulting therefrom; but in that event the
commencement and termination dates of the Lease. and all other dates affected
thereby shall be revised to conform to the date of Landlord's delivery of
possession, as specified in Paragraph 2 (b), above. The above is, however,
subject to the provision that the period of delay, of delivery of the premises
shall not exceed 30 days from the commencement date herein (except those delays
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.
* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting partial
month will be pro-rated (for the number of days in the partial month) at the
Basic Rent scheduled for the projected commencement date as shown in Paragraph
43.
4. RENT
A. Basic Rent. Tenant agrees to Pay to Landlord at such place as Landlord may
designate without deduction. offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of
FOUR-HUNDRED FIFTEEN THOUSAND SEVEN HUNDRED EIGHTY NINE & 20/100 ($415,789.20)
Dollars in lawful money of the United States of America, payable as follows:
SEE PARAGRAPH 43 FOR BASIC RENT SCHEDULE
B. Time for Payment. In the event that the term of this Lease commences on a
date other than the first day of the calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from such
date of commencement to the full day of the next succeeding calendar month that
proportion of the monthly rent hereunder which the number of days between such
date of commencement and the first day of the next succeeding calendar month
bears to thirty (30). In the event that the term of this Lease for any reason
ends on a date other than the last day of a calendar month, on the first day of
the last calendar month of the term hereof (Tenant shall pay to Landlord as rent
for the period from said first day of said last calendar month to and including
the last day of the term hereof that proportion of the monthly rent hereunder
which the number of days between said first day of said last calendar month and
the last day of the term hereof bears to thirty (30).
<PAGE> 7
C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant is
in default in the payment of rental as set forth in this Paragraph 4 when due,
or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rental due, a late charge for each rental payment in default ten (10)
days. Said late charge shall equal five (5%) percent of each rental payment to
in default.
D. Additional Rent. Beginning with the commencement date of the term of this
Lease, Tenant shall pay to Landlord in addition to the Basic Rent and as
Additional Rent the following:
(a) Tenant's proportionate share of all Taxes relating to the Complex as
set forth in Paragraph 12, and (b) Tenant's proportionate share of all
insurance premiums relating to the Complex, as set forth in Paragraph
l5, and
(c) Tenant's proportionate share of expenses for the operation, management,
maintenance and repair of the Building (including common areas of the
Building) and Common Areas of the Complex in which the Premises are
located as set forth in Paragraph 7, and
(d) All charges, costs and expenses, which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including attorneys' fees and legal expenses, that may accrue thereto
in the event of Tenant's failure to pay such amounts, and all damages,
reasonable costs and expenses which Landlord may incur by reason of
default of Tenant or failure on Tenant's part to comply with the terms
of this Lease. In the event of nonpayment by Tenant of Additional Rent.
Landlord shall have all the rights and remedies with respect thereto as
Landlord has for nonpayment of rent.
The Additional Rent due hereunder shall be paid to Landlord or Landlord's agent
(i) within five days for taxes, 15 days for insurance, and 30 days for all other
Additional Rent items after presentation of invoice from Landlord or Landlord's
agent setting forth such Additional Rent and/or (ii) at the option of Landlord,
Tenant shall pay to Landlord monthly, in advance, Tenant's prorata share of an
amount estimated by Landlord to be Landlord's approximate average monthly
expenditure for such Additional Rent items, which estimated amount shall be
reconciled within 120 days of the end of each calendar year or more frequently
if Landlord so elects to do so at Landlord's sole and absolute discretion, as
compared to Landlord's actual expenditure for said Additional Rent items, with
Tenant paying to Landlord, upon demand, any amount of actual expenses expended
by Landlord in excess of said estimated amount, or Landlord refunding to Tenant
(providing Tenant is not in default in the performance of any of the terms,
covenants and conditions of this Lease) any amount of estimated payments made by
Tenant in excess of Landlord's actual expenditures for said Additional Rent
items.
The respective obligations of Landlord and Tenant under this paragraph shall
survive the expiration or other termination of the term of this Lease, and if
the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.
<PAGE> 8
E. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder and
all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at PEERY/ARRILLAGA, FILE 1504, BOX 60000, SAN FRANCISCO, CA
94160 or to such other person or to such other place as Landlord may from time
to time designate in writing.
F. Security Deposit. Concurrently with the Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of TWELVE THOUSAND ONE HUNDRED NINETY
ONE AND 35/100 ($12,191.35) Dollars. Said sum shall be held by Landlord as a
Security Deposit for the faithful performance by Tenant of all of the terms.
Covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults with respect to any provision of this
Lease, including, but not limited to, the provisions relating to the payment of
rent and any of the monetary sum due herewith, Landlord may (but shall not be
required to) use, apply or retain all or any part of this Security Deposit for
the payment of any other amount which Landlord may spend by reason of Tenant's
default or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of said Deposit is so
used or applied, Tenant shall, within ten (10) days after written demand
therefor, deposit cash with Landlord in the amount sufficient to restore the
Security Deposit to its original amount. Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Deposit. If Tenant fully and faithfully performs
every provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of' termination of
Landlord's interest in this Lease. Landlord shall transfer said Deposit to
Landlord's successor in interest whereupon Tenant agrees to release Landlord
from liability for the return of such Deposit or the accounting therefor.
5. RULES AND REGULATIONS AND COMMON AREA Subject to the terms and conditions of
this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common with other occupants of the Complex in which the Premises are located,
and their respective employees, invitees and customers, and others entitled to
the use thereof, have the non-exclusive right to use the access roads, parking
areas, and facilities provided and designated by Landlord for the general use
and convenience of the occupants of the Complex in which the Premises are
located, which areas and facilities are referred to herein as "Common Area".
This right shall terminate upon the termination of this Lease. Landlord reserves
the right from time to time to make changes in the shape, size, location, amount
and extent of Common Area. Landlord further reserves the right to promulgate
such reasonable rules and regulations relating to the use of the Common Area,
and any part or parts thereof, as Landlord may deem Appropriate for the best
interests of the occupants of the Complex. The Rules and Regulations shall be
binding upon Tenant upon delivery of a copy of them to Tenant, and Tenant shall
abide by them and cooperate in their observance. Such Rules and Regulations may
be amended by Landlord from time to time, with or without advance notice, and
all amendments shall be effective upon delivery of a copy to Tenant. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant
or occupant of the Complex of any of said Rules and Regulations.
<PAGE> 9
Landlord shall operate, manage and maintain the Common Area. The manner in which
the Common Area shall be maintained and the expenditures for such maintenance
shall be at the discretion of Landlord.
6. PARKING Tenant shall have the right to use with other tenants or occupants of
the Complex 47 parking spaces in the common parking areas of the Complex. Tenant
agrees, that Tenant, Tenant's employees, agents, representatives and/or invitees
shall not use parking spaces in excess of said 47 spaces allocated to Tenant
hereunder. Landlord shall have the right, at Landlord's sole discretion, to
specifically designate the location of Tenant's parking spaces within the common
parking areas of the Complex in the event of a dispute among the tenants
occupying the building and/or Complex referred to herein, in which event Tenant
agrees that Tenant, Tenant's employees, agents, representatives and/or invitees
shall not use any parking spaces other than those parking spaces specifically
designated by Landlord for Tenant's use. Said parking spaces, if specifically
designated by Landlord to Tenant, may be relocated by Landlord at any time, and
from time to time. Landlord reserves the right, at Landlord's sole discretion,
to rescind any specific designation of parking spaces, thereby returning
Tenant's parking spaces to the common parking area. Landlord shall give Tenant
written notice of any change in Tenant's parking spaces. Tenant shall not, at
any time, park, or permit to be parked, any trucks or vehicles adjacent to the
loading areas so as to interfere in any way with the use of such areas, nor
shall Tenant any time park, or permit the parking of Tenant's trucks or other
vehicles or the trucks and vehicles of Tenant's suppliers or others, in any
portion of the common area not designated by Landlord for such use by Tenant.
Tenant shall not park nor permit to be parked, any inoperative vehicles or
equipment on any portion of the common parking area or other common areas of the
Complex. Tenant agrees to assume responsibility for compliance by its employees
with the parking provision contained herein. If Tenant or its employees park in
other than such designated parking areas, then Landlord may charge Tenant, as an
additional charge, and Tenant agrees to pay, ten ($10.00) Dollars per day for
each day or partial day each such vehicle is parked in any area other than that
designated. Tenant hereby authorizes Landlord at Tenant's sole expense to tow
away from the Complex any vehicle belonging to Tenant or Tenant's employees
parked in violation of these provisions, or to attach violation stickers or
notices to such vehicles. Tenant shall use the parking areas for vehicle parking
areas, then Landlord may charge Tenant, as an additional charge, and Tenant
agrees to pay, ten ($10.00) Dollars per day for each day or partial day each
such vehicle is parked in any area other than that designated. Tenant hereby
authorizes Landlord at Tenant's sole expense to tow away from the Complex any
vehicle belonging to Tenant or Tenant's employees parked in violation of these
provisions, or to attach violation stickers or notices to such vehicles. Tenant
shall use the parking areas for vehicle parking only, and shall not use the
parking areas for storage.
7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE
COMPLEX AND BUILDING IN WHICH THE PREMISES ARE LOCATED Subject to Paragraph 46,
As Additional Rent and in accordance with Paragraph 4 D of this Lease, Tenant
shall pay to Landlord Tenant's proportionate share (calculated on a square
footage or other equitable basis as calculated by Landlord) of all expenses of
operation, management, maintenance and repair of the Common Areas of the Complex
including, but not limited to, license, permit, and inspection fees; security;
utility charges associated with exterior landscaping and lighting (including
water and sewer charges); all charges incurred in the
<PAGE> 10
maintenance of landscaped areas, lakes, parking lots, sidewalks, driveways;
maintenance, repair and replacement of all fixtures and electrical, mechanical,
and plumbing systems; structural elements and exterior surfaces of the
buildings; salaries and employee benefits of personnel and payroll taxes
applicable thereto; supplies, materials, equipment and tools; the cost of
capital expenditures which have the effect of reducing operating expenses,
provided, however, that in the event Landlord makes such capital improvements,
Landlord may amortize its investment in said improvements (together with
interest at the rate of fifteen (15%) percent per annurn on the unamortized
balance) as an operating expense in accordance with standard accounting
practices, provided, that such amortization is not at a rate greater than the
anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt repayments;
interest on charges; expenses directly or indirectly incurred by Landlord for
the benefit of any other tenant; cost for the installation of partitioning or
any other tenant improvements; cost of attracting tenants; depreciation;
interest, or executive salaries.
As Additional Rent and in accordance with paragraph 4 D of this Lease, Tenant
shall pay its proportionate share (calculated on a square footage or other
equitable basis as calculated by Landlord) of the cost of operation (including
common utilities), management, maintenance, and repair of the building
(including common areas such as lobbies, restrooms, janitor's closets, hallways,
elevators, mechanical and telephone rooms, stairwells, entrances, spaces above
the ceilings and janitorization of said common areas) in which the Premises are
located. The maintenance items herein referred to include, but are not limited
to, all windows, window frames, plate glass, glazing, truck doors, main plumbing
systems of the building (such as water and drain lines, sinks, toilets, faucets,
drains, showers and water fountains), main electrical systems (such as panels
and conduits), heating and airconditioning systems (such as compressors, fans,
air handlers, ducts, boilers, heaters), store fronts, roofs, downspouts,
building common area interiors (such as wall coverings, window coverings, floor
coverings and partitioning), ceilings, building exterior doors, skylights (if
any), automatic fire extinguishing systems, and elevators; license, permit, and
inspection fees; security, salaries and employee benefits of personnel and
payroll taxes applicable thereto; supplies, materials, equipment and tools; the
cost of capital expenditures which have the effect of reducing operating
expenses, provided, however, that in the event Landlord makes such capital
improvements, Landlord may amortize its investment in said improvements
(together with interest at the rate of fifteen (15%) percent per annurn on the
unamortized balance) as an operating expense in accordance with standard
accounting practices, provided, that such amortization is not at a rate greater
than the anticipated savings in the operating expenses. Tenant hereby waives all
rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941
and 1942 of the California Civil Code and under any similar law, statute or
ordinance now or hereafter in effect.
8. ACCEPTANCE AND SURRENDER OF PREMISES Subject to Paragraphs 45 and 46, and
upon Lease Commencement, Tenant accepts the Premises as being in good and
sanitary order, condition and repair and accepts the building and improvements
included in the Premises in their present condition and without representation
or warranty by Landlord as to the condition of such building or as to the use or
occupancy which may be made thereof. Any exceptions to the foregoing must be by
written agreement executed by Landlord and Tenant. Tenant agrees on the
<PAGE> 11
last day of the Lease term, or on the sooner termination of this Lease, to
surrender the Premises promptly and peaceably to Landlord in good condition and
repair (damage by Acts of God, fire, normal wear and tear excepted), with all
interior walls painted, or cleaned so that they appear freshly painted, and
repaired and replaced, if damaged; all floors cleaned and waxed; all carpets
cleaned and shampooed; the airconditioning and heating equipment serviced by a
reputable and licensed service firm and in good operating condition (provided
the maintenance of such equipment has been Tenant's responsibility during the
term of this Lease) together with all alterations, additions, and improvements
which may have been made in, to, or on the Premises (except movable trade
fixtures installed at the expense of Tenant) except that Tenant shall ascertain
from Landlord within thirty (30) days before the end of the term of this Lease
whether Landlord desires to have the Premises or any part or parts thereof
restored to their condition and configuration as when the Premises were
delivered to Tenant and if Landlord shall so desire, then Tenant shall restore
said Premises or such part or parts thereof before the end of this Lease at
Tenant's sole cost and expense. Tenant, on or before the end of the term or
sooner termination of this Lease, shall remove all of Tenant's personal property
and trade fixtures from the Premises, and all property not so removed on or
before the end of the term or sooner termination of this Lease shall be deemed
abandoned by Tenant and title to same shall thereupon pass to Landlord without
compensation to Tenant. Landlord may, upon termination of this Lease, remove all
moveable furniture and equipment so abandoned by Tenant, at Tenant's sole cost,
and repair any damage caused by such removal at Tenant's sole cost. If the
Premises be not surrendered at the end of the term or sooner termination of this
Lease. Tenant shall indemnify Landlord against loss or liability resulting from
the delay by Tenant in so surrendering the Premises including, without
limitation, any claims made by any succeeding tenant founded on such delay.
Nothing contained herein shall be construed as an extension of the term hereof
or as a consent of Landlord to any holding over by Tenant. The voluntary or
other surrender of this Lease or the Premises by Tenant or a mutual cancellation
of this Lease shall not work as a merger and, at the option of Landlord, shall
either terminate all or any existing subleases or subtenancies or operate as an
assignment to Landlord of all or any such subleases or subtenancies.
9. ALTERATIONS AND ADDITIONS Tenants shall make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant, but at the cost of Tenant,
and any addition to, or alteration of, the Premises, except moveable furniture
and trade fixtures, shall at once become a part of the Premises and belong to
Landlord. Landlord reserves the right to approve all contractors and mechanics
proposed by Tenant to make such alterations and additions. Tenant shall retain
title to all moveable furniture and trade fixtures placed in the Premises. All
heating, lighting, electrical, airconditioning floor to ceiling partitioning,
drapery, carpeting, and floor installations made by Tenant, together with all
property that has become an integral part of the Premises, shall not be deemed
trade fixtures. Tenant agrees that it will not proceed to make such alteration
or additions, without having obtained consent from Landlord to do so, and until
five (5) days from the receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work. Tenant
shall, if required by Landlord, secure at Tenant's own cost and expense, a
completion and lien indemnity bond, satisfactory to Landlord, for such work.
Tenant further covenants and agrees that any mechanic's lien filed against the
Premises or against the Complex for work claimed to have been
<PAGE> 12
done for, or materials claimed to have been furnished to Tenant, will be
discharged by Tenant, by bond or otherwise, within ten (10) days after the
filing thereof, at the cost and expense of Tenant. Any exceptions to the
foregoing must be made in writing and executed by both Landlord and Tenant.
10. TENANT MAINTENANCE Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, and in good and sanitary condition. Tenant's
maintenance and repair responsibilities herein referred to include, but are not
limited to, janitorization, plumbing systems within the non-common areas of the
Premises (such as water and drain lines, sinks), electrical systems within the
non-common areas of the Premises (such as outlets, lighting fixtures, lamps,
bulbs, tubes, ballasts), heating and airconditioning controls within the
non-common areas of the Premises (such as mixing boxes, thermostats, time
clocks, supply and return grills), all interior improvements within the premises
including but not limited to: wall coverings, window coverings, acoustical
ceilings, vinyl tile, carpeting, partitioning, doors (both interior and
exterior, including closing mechanisms, latches, locks), and all other interior
improvements of any nature whatsoever. Tenant agrees to provide carpet shields
under all rolling chairs or to otherwise be responsible for wear and tear of the
carpet caused by such rolling chairs if such wear and tear exceeds that caused
by normal foot traffic in surrounding areas. Areas of excessive wear shall be
replaced at Tenant's sole expense upon Lease termination. See Paragraph 46.
11. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED As Additional
Rent and in accordance with paragraph 4 D this Lease, Tenant shall pay its
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the costs of all utility charges such as water, gas,
electricity, telephone, telex and other electronic communications service, sewer
service, waste pick-up and any other utilities, materials or services furnished
directly to the building in which the Premises are located, including, without
limitation, any temporary or permanent utility surcharge or other exactions
whether or not hereinafter imposed.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
Provided that Tenant is not in default in the performance or observance of any
of the terms, covenants or conditions of this Lease to be performed or observed
by it, Landlord shall furnish to the Premises between the hours of 8:00AM and
6:00PM, Mondays through Fridays (holidays excepted) and subject to the rules and
regulations of the Complex hereinbefore referred to, reasonable quantities of
water, gas and electricity suitable for the intended use of the Premises and
heat and airconditioning required in Landlord's judgment for the comfortable use
and Occupation of the Premises for such purposes. Tenant may, from time to time,
have its staff and equipment operate on a twenty-four (24) hour-a-day, seven (7)
day-a-week schedule, and Tenant shall pay for any extra utilities used by
Tenant. Tenant agrees that at all times it will cooperate fully with Landlord
and abide by all regulations and requirements that Landlord may prescribe for
the proper
<PAGE> 13
functioning and protection of the building heating, ventilating and
airconditioning systems. Whenever heat generating machines, equipment, or any
other devices (including exhaust fans) are used in the Premises by Tenant which
affect the temperature or otherwise maintained by the airconditioning system,
Landlord shall have the right to install supplementary airconditioning units in
the Premises and the cost thereof, including the cost of installation and the
cost of operation and maintenance thereof, shall be paid by Tenant to Landlord
upon demand by Landlord. Tenant will not, without the written consent of
Landlord, use any apparatus or device in the Premises (including, without
limitation), electronic data processing machines or machines using current in
excess of 110 Volts which will in any way increase the amount of electricity,
gas, water or airconditioning usually furnished or supplied to premises being
used as general office space, or connect with electric current (except through
existing electrical outlets in the Premises), or with gas or water pipes any
apparatus or device for the purposes of using electric current, gas, or water.
If Tenant shall require water, gas, or electric current in excess of that
usually funished or supplied to premises being used as general office space,
Tenant shall first obtain the written consent of Landlord, which consent shall
not be unreasonably withheld and Landlord may cause an electric current, gas, or
water meter to be installed in the Premises in order to measure the amount of
electric current, gas or water consumed for any such excess use. The cost of any
such meter and of the installation, maintenance and repair thereof, all charges
for such excess water, gas and electric current consumed (as shown by such
meters and the rates then charged by the furnishing public utility); and any
additional expense incurred by Landlord in keeping account of electric current,
gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay
Landlord therefor promptly upon demand by Landlord.
12. TAXES
A. As Additional Rent and in accordance with Paragraph 4 D of this Lease, Tenant
shall pay to Landlord Tenant's proportionate share of all Real Property Taxes,
which prorata share shall be allocated to the leased Premises by square footage
or other equitable basis, as calculated by Landlord. The term "Real Property
Taxes", as used herein, shall mean (i) all taxes, assessments, levies and other
charges of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership of the Complex)
now or hereafter imposed by any governmental or quasi-governmental authority or
special district having the direct or indirect power to tax or levy assessments,
which are levied or assessed against, or with respect to the value, occupancy or
use of, all or any portion of the Complex (as now constructed or as may at any
time hereafter be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Complex (regardless of
ownership); the fixtures, equipment and other property of Landlord, real or
personal, that are an integral part of and located in the Complex; or parking
areas, public utilities, or energy within the Complex; (ii) all charges, levies
or fees imposed by reason of environmental regulation or other governmental
control of the Complex, and (iii) all costs and fees (including reasonable
attorneys' fees) incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If at any time
during the term of this Lease the taxation or assessment of the Complex
prevailing as of the commencement date of this Lease shall be altered so that in
lieu of or in addition to any Real Property Tax described above there shall be
levied, assessed or imposed (whether by reason of a change in the method of
taxation or assessment, creation of a new tax or
<PAGE> 14
charge, or any other cause) an alternate or additional tax or charge (i) on the
value, use or occupancy of the Complex or Landlord's interest therein or (ii) on
or measured by the gross receipts, income or rentals from the Complex, on
Landlord's business of leasing the Complex, or computed in any manner with
respect to the operation of the Complex, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Complex, then only that part of such real
Property Tax that is fairly allocable to the Complex shall be included within
the meaning of the term "Real Property Taxes". Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources.
B. Taxes on Tenant's Property
(a) Tenant shall be liable for and shall pay ten days before delinquency, taxes
levied against any personal property or trade mixtures placed by Tenant or about
the Premises. If any such taxes on Tenant's personal property or trade mixtures
are levied against Landlord or Landlord's property or if the assessed value of
the Premises is increased by the inclusion therein of a value placed upon such
personal property or trade fixtures, of Tenant and if Landlord, after written
notice to Tenant, pays the taxes based on such increased assessment, which
Landlord shall have the right to do regardless of the validity thereof, but only
under proper protest if requested by Tenant. Tenant shall upon demand, as the
cast may be, repay to Landlord the taxes so levied against Landlord, or the
proportion of such taxes resulting from such increase in the assessment,
provided that in any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation, to bring suit in any court of
competent jurisdiction to recover the amount of any such taxes so paid under
protest, and any amount so recovered shall belong to Tenant.
(b) if the Tenant improvements in the Premises, whether installed, and/or paid
for by Landlord or Tenant and whether or not affixed to the real property so as
to become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which standard office improvements in
other space in the Complex are assessed, then the real property taxes and
assessments levied against Landlord or the Complex by reason of such excess
assessed valuation shall be deemed to be taxes levied against personal property
of Tenant and shall be governed by the provisions of 12Ba, above. If the records
of the County Assessor are available and sufficiently detailed to serve as a
basis for determining whether said Tenant improvements are assessed at a higher
valuation than standard office improvements in other space in the Complex, such
records shall be binding on both the Landlord and the Tenant. If the records, of
the County Assessor are not available or sufficiently detailed to serve as a
basis for making said determination, the actual cost of construction shall be
used.
13. LIABILITY INSURANCE Tenant at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of comprehensive public liability
insurance with limits in the amount of $500,000/$2,000,000 for injuries to or
death of persons occurring in, on or about the Premises or the Complex, and
property damage insurance with limits of $500,000. The policy or policies
affecting such insurance, certificates of insurance of which shall be furnished
to Landlord, shall name Landlord as additional insured, and shall insure any
liability of Landlord, contingent or otherwise, as respects acts or omissions of
Tenant, its agents, employees or invitees or otherwise
<PAGE> 15
by any conduct or transactions of any of said persons in or about or concerning
the Premises issued by an insurance company admitted to transact business in the
State of California; shall provide that the insurance effected thereby shall not
be canceled, except upon thirty (30) days prior written notice to Landlord. If,
during the term of this Lease, in the considered opinion of Landlord's Lender,
insurance advisor, or counsel, the amount of insurance described in this
paragraph 13 is not adequate, Tenant agrees to increase said coverage to such
reasonable amount as Landlord's Lender, insurance advisor, or counsel shall deem
adequate, provided such increase is reasonable in light of practices and customs
respecting comparable buildings in the vicinity of the Premises.
14. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage insurance
in "all risk" form with a sprinkler leakage endorsement insuring the personal
property, inventory, trade mixtures, and leasehold improvements within the
leased Premises for the full replacement value thereof. The proceeds from any of
such policies shall be used for the repair or replacement of such items so
insured or for other items or equipment to be used in Tenant's business to be
conducted in the Premises leased hereunder; provided, however, in the event
Tenant's ongoing business plan does not include the ongoing use of the items
insured, Tenant may use the insurance proceeds as Tenant desires.
Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.
15. PROPERTY INSURANCE Landlord shall purchase and keep in force and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the deductibles on insurance claims and the cost of
policy or policies of insurance covering loss or damage to the Premises and
Complex in the amount of the full replacement value thereof, providing
protection against those perils included within the classification of "all
risks" insurance and flood and/or earthquake insurance, if available, plus a
policy of rental income insurance in the amount of one hundred (100%) percent of
twelve (12) months Basic Rent, plus sums paid as Additional Rent. If such
insurance cost is increased due to Tenant's use of the Premises or the Complex,
Tenant agrees to pay to Landlord the full cost of such increase. Tenant shall
have no interest in nor any right to the proceeds of any insurance procured by
Landlord for the Complex.
Landlord and Tenant do each hereby respectively release the other, to the extent
of insurance coverage of the releasing party, from any liability for loss or
damage caused by fire or any of the extended coverage casualties included in the
releasing party's insurance policies, irrespective of the cause of such fire or
casualty; provided, however, that if the insurance policy of either releasing
party prohibits such waiver, then this waiver shall not take effect until
consent to such waiver is obtained. If such waiver is so prohibited, the insured
party affected shall promptly notify the other party thereof. Notwithstanding
anything to the contrary in this Paragraph, if either party is prohibited under
its insurance policy from releasing the other party, then in lieu of such
release, said party shall name the other as an additional insured under the
policy.
<PAGE> 16
16. See Paragraph 47.
17. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. This paragraph shall not
be interpreted as requiring Tenant to make structural changes or improvements,
except to the extent such changes or improvements are required as a result of
Tenant's use of the Premises. Tenant shall, at its sole cost and expense, comply
with any and all requirements pertaining to said Premises, of any insurance
organization or company, necessary for the maintenance of reasonable fire and
public liability insurance covering the Premises.
18. LIENS Tenant shall keep the Premises and the Complex free from any
liens arising out of any work performed, materials furnished or obligation
incurred by Tenant. In the event that Tenant shall not, within ten (10) days
following the imposition of such lien, cause the same to be released of record,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but no obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All sums paid by Landlord for such purpose, and all expenses incurred
by it in connection therewith, shall be payable to Landlord by Tenant on demand
with interest at the prime rate of interest as quoted by the Bank of America.
19. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or
hypothecate the leasehold estate under this Lease, or any interest therein, and
shall not sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity to occupy or use the
Premises, or any portion thereof, without, in each case, the prior written
consent of Landlord which consent will not be unreasonably withheld. As a
condition for granting this consent to any assignment, transfer, or subletting,
Landlord may require that Tenant agrees to pay to Landlord, as additional rent,
all rents or additional consideration received by Tenant from its assignees,
transferees, or subtenants in excess of the rent payable by Tenant to Landlord
hereunder. Tenant shall, by thirty (30) days written notice, advise Landlord of
its intent to assign or transfer Tenant's interest in the Lease or sublet the
Premises or any portion thereof for any part of the term hereof. Tenant may
proceed to locate an acceptable sublessee, assignee, or other transferee for
presentment to Landlord for Landlord's approval, all in accordance with the
terms, covenants, and conditions of this paragraph 19. In the event Tenant is
allowed to assign, transfer or sublet the whole or any part of the Premises,
with the prior written consent of Landlord, no assignee, transferee or subtenant
shall assign or transfer this Lease, either in whole or in part, or sublet the
whole or any part of the Premises, without also having obtained the prior
written consent of Landlord which consent shall not be unreasonably withheld. A
consent of Landlord to one assignment, transfer, hypothecation, subletting,
occupation or use by any other person shall not release Tenant from any of
Tenant's obligations hereunder or be deemed to be a consent to any subsequent
similar or dissimilar assignment, transfer, hypothecation, subletting,
occupation or use by any other person. Any such assignment, transfer,
hypothecation, subletting, occupation or use without such consent shall be void
and shall constitute a breach of this Lease by Tenant and shall, at the option
of Landlord exercised by written notice to Tenant, terminate this Lease. The
leasehold estate under this Lease shall not, nor shall any interest therein, be
assignable for any purpose by operation of law without the written consent of
Landlord which consent shall not be unreasonably withheld. As a condition to its
consent, Landlord may require Tenant to pay all expenses in connection with the
assignment, and Landlord may require Tenant's assignee or transferee (or other
assignees or transferees) to assume in writing all of the obligations under this
Lease and for Tenant to remain liable to Landlord under the Lease. See Paragraph
48.
20. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord.
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding the foregoing. See Paragraph 49.
21. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times
during business hours and after at least 24 hours notice (except in
emergencies) have the right to enter the Premises to inspect them to perform
any services to be provided by Landlord hereunder, to submit the Premises to
prospective purchasers, mortgagors or tenants; to post notices of
nonresponsibility; and to alter, improve or repair the Premises and any portion
of the Complex, all without abatement of rent; and may erect scaffolding and
other necessary structures in or through the Premises where reasonably required
by the character of the work to be performed; provided, however, that the
business of Tenants shall be interfered with to the least extent that is
reasonably practical. For each of the foregoing purposes, any entry to the
Premises obtained by Landlord by any of said means, or otherwise, shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof. Landlord
shall also have the right at any time to change the arrangement or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets or other public parts of the Complex and to change the name, number or
designation by which the Complex is commonly known, and none of the foregoing
shall be deemed an actual or constructive eviction of Tenant, or shall entitle
Tenant to any reduction of rent hereunder.
22. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days after an order for relief in a liquidation action or within thirty (30)
days after the commencement of any action.
Within thirty (30) days after court approval of the assumption of this Lease,
the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.
Nothing contained in this section shall affect the existing right of Landlord to
refuse to accept an assignment upon commencement of or in connection with a
bankruptcy, liquidation, reorganization or insolvency action or an assignment of
Tenant for the benefit of creditors or other similar act. Nothing contained in
this Lease shall be construed as giving or granting or creating an equity in the
demised Premises to Tenant. In no event shall the leasehold estate under this
Lease, or any interest therein, be assigned by voluntary or involuntary
bankruptcy proceeding without the prior written consent of Landlord. In no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or representation made
under this Lease shall constitute a default hereunder by Tenant upon expiration
of the appropriate grace period hereinafter provided. Tenant shall have a period
of fifteen (15) days from the date of written notice from Landlord within which
to cure any default in the payment of rental or adjustment thereto. Tenant shall
have a period of thirty (30) days from the date of written notice from Landlord
within which to cure any other default under this Lease; provided, however, that
if the nature of Tenant's failure is such that more than thirty (30) days is
reasonably required to cure the same, Tenant shall not be in default so long as
Tenant commences performance within such thirty (30) day period and thereafter
prosecutes the same to completion. Upon an uncured default of this Lease by
Tenant, Landlord shall have the following rights and remedies in addition to any
other rights or remedies available to Landlord at law or in equity:
(a). The rights and remedies provided for by California Civil Code Section
1951.2, including, but not limited to, recovery of the worth at the time of
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of rental loss for the same period that
Tenant proves could be reasonably avoided, as computed pursuant to subsection
(b) of said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3)
of Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner. Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate
<PAGE> 17
broker, and the three licensed real estate brokers so selected shall determine
the amount of the rental loss that could be reasonably avoided from the balance
of the term of this Lease after the time of award. The decision of the majority
of said licensed real estate brokers shall be final and binding upon the
parties hereto.
(b). The rights and remedies provided by California Civil Code Section which
allows Landlord to continue the Lease in effect and to enforce all of its
rights and remedies under this Lease, including the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession; acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.
(c). The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d). To the extent permitted by law, the right and power to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of
Tenant, and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs
to the Premises. Upon each subletting, (i) Tenant shall be immediately liable
to pay Landlord, in addition to indebtedness other than rent due hereunder, the
cost of such subletting, including, but not limited to, reasonable attorneys'
fees, and any real estate commissions actually paid, and the cost of such
alterations and repairs incurred by Landlord and the amount, if any, by which
the rent hereunder for the period of such subletting (to the extent such period
does not exceed the term hereof) exceeds the amount to be paid as rent for the
Premises for such period or (ii) at the option of Landlord, rents received from
such subletting shall be applied first to payment of indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
of such subletting and of such alterations and repairs; third to payment of
rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future rent as the same becomes due
hereunder. If Tenant has been credited with any rent to be received by such
subletting under option (i) and such rent shall not be promptly paid to
Landlord by the subtenant(s), or if such rentals received from such subletting
under option (ii) during any month be less than that to be paid during that
month by Tenant hereunder, Tenant shall pay such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. For all purposes set forth in
this subparagraph d., No taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant. Notwithstanding any such
subletting without termination. Landlord may at any time hereafter elect to
terminate this Lease for such previous breach.
(e). The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises and to exercise all other rights and remedies granted to
Landlord pursuant to subparagraph d. above.
23. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease (except that Tenant may vacate so long as it pays
rent, provides an on-site security guard during normal business hours from
Monday through Friday, and otherwise performs its obligations hereunder) and if
Tenant shall abandon, vacate or surrender said Premises, or be dispossessed by
the process of law, or otherwise, any personal property belonging to Tenant and
left on the Premises shall be deemed to be abandoned, at the option of
Landlord, except such property as may be mortgaged to Landlord.
24. DESTRUCTION In the event the Premises are destroyed in whole or in part
from any cause, except for routine maintenance and repairs and incidental damage
and destruction caused from vandalism and accidents for which Tenant is
responsible for under Paragraph 10. Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the damage or
destruction, or
(b) Terminate this Lease (providing that the Premises is damaged to the
extent of 33 1/3% of the replacement cost and provided, however, that Landlord
shall be obligated to promptly rebuild or restore the Premises if Landlord
reasonably estimates that such repairs can be made within one hundred twenty
(120) days from the date of such damage or destruction).
If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior
to the damage or destruction. Tenant shall be entitled to a reduction in rent
while such repair is being made in the proportion that the area of the Premises
rendered untenantable by such damage bears to the total area of the Premises.
If Landlord initially estimates that the rebuilding or restoration will exceed
120 days or if Landlord does not complete the rebuilding or restoration
within one hundred twenty (120) days following the date of destruction (such
period of time to be extended for delays caused by the fault or neglect of
Tenant or because of Acts of God, acts of public agencies, labor disputes,
strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain
materials, supplies or fuels, acts of contractors or subcontractors, or delay
of the contractors or subcontractors due to such causes or other contingencies
beyond the control of Landlord), then Tenant shall have the right to terminate
this Lease by giving fifteen (15) days prior written notice to Landlord.
Notwithstanding anything herein to the contrary, Landlord's obligation to
rebuild or restore shall be limited to the building and interior improvements
constructed by Landlord as they existed as of the commencement date of the Lease
and shall not include restoration of Tenant's trade fixtures, equipment,
merchandise, or any improvements, alterations or additions made by Tenant to
the Premises, which Tenant shall forthwith replace or fully repair at Tenant's
sole cost and expense provided this Lease is not cancelled according to the
provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of
the California Civil Code.
In the event that the building in which the Premises are situated is damaged
or destroyed to the extent of not less than 33 1/3% of the replacement cost
thereof, Landlord may elect to terminate this Lease, whether the Premises be
injured or not.
25. EMINENT DOMAIN If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or
conveyance in lieu thereof, this Lease shall terminate as to any portion of the
Premises so taken or conveyed on the date when title vests in the condemnor,
and Landlord shall be entitled to any and all payment, income, rent, award, or
any interest therein whatsoever which may be paid or made in connection with
such taking or conveyance, and Tenant shall have no claim against Landlord or
otherwise for the value of any unexpired term of this Lease. Notwithstanding
the foregoing paragraph, any compensation specifically awarded Tenant for loss
or business, Tenant's personal property, moving cost or loss of goodwill, shall
be and remain the property of Tenant.
If (i) any action or proceeding is commenced for such taking of the Premises
or any substantial part thereof, or if Landlord is advised in writing by any
entity or body having the right or power of condemnation of its intention to
condemn the premises or any portion thereof, or (ii) any of the foregoing
events occur with respect to the taking of any space in the Complex not leased
hereby, or if any such spaces so taken or conveyed in lieu of such taking and
Landlord shall decide to discontinue the use and operation of the Complex, or
decide to demolish, alter or rebuild the Complex, then, in any of such events
Landlord shall have the right to terminate this Lease by giving Tenant written
notice thereof within sixty (60) days of the date of receipt of said written
advice, or commencement of said action or proceeding, or taking conveyance,
which termination shall take place as of the first to occur of the last day of
the calendar month next following the month in which such notice is given or
the date on which title to the Premises shall vest in the condemnor.
In the event of such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business, Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the
calendar month next following the month in which such notice is given, upon
payment by Tenant of the rent from the date of such taking or conveyance to the
date of termination.
If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of
the Premises not so taken or conveyed, and the rent herein shall be apportioned
as of the date of such taking or conveyance so that thereafter the rent to be
paid by Tenant shall be in the ratio that the area of the portion of the
Premises not so taken or conveyed bears to the total area of the Premises
prior to such taking.
26. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Complex or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any
further liability upon any of the terms, covenants or conditions (express or
implied) herein contained in favor of Tenant, and in such event, insofar as
such transfer is concerned, Tenant agrees to look solely to the responsibility
of the successor in interest of such transferor in and to the Complex and this
Lease. This Lease shall not be affected by any such sale or conveyance, and
Tenant agrees to attorn to the successor in interest of such transferor. See
Paragraph 51
27. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord
in the land and buildings in which the leased Premises are located (whether
such interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.
28. HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly
provided in this Lease. Any holding over after the expiration or other
termination of the term of this Lease, with the consent of Landlord, shall be
construed to be a tenancy from month to month, on the same terms and conditions
herein specified insofar as applicable except that the monthly Basic Rent shall
be increased to an amount equal to one hundred thirty (130%) percent of the
monthly Basic Rent required during the last month of the Lease term.
page 6 of 8
<PAGE> 18
29. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten
(10) days' prior written notice to Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults, if any, are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant that this Lease is in full force and effect, without
modification except as may be represented by Landlord; that there are no
uncured defaults in Landlord's performance, and that not more than one month's
rent has been paid in advance.
30. CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes,
or any changes in plans for any other portions of the Complex shall affect
this Lease or entitle Tenant to any reduction of rent hereunder or result in
any liability of Landlord to Tenant. Landlord does not guarantee the accuracy
of any drawings supplied to Tenant and verification of the accuracy of such
drawings rests with Tenant.
31. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid
by it hereunder or shall fail to perform any other term or covenant hereunder
on its part to be performed, and such failure shall continue for five (5) days
after written notice thereof by Landlord. Landlord, without waiving or
releasing Tenant from any obligation of Tenant hereunder, may, but shall not be
obligated to, make any such payment or perform any such other term or covenant
on Tenant's part to be performed. All sums so paid by Landlord and all
necessary costs of such performance by Landlord together with interest thereon
at the rate of the prime rate of interest per annum as quoted by the Bank of
America from the date of such payment or performance by Landlord, shall be paid
(and Tenant covenants to make such payment) to Landlord on demand by Landlord,
and Landlord shall have (in addition to any other right or remedy of Landlord)
the same rights and remedies in the event of nonpayment by Tenant as in the
case of failure by Tenant in the payment of rent hereunder.
32. ATTORNEYS' FEES.
(A) In the event that either Landlord or Tenant should bring suit for
the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgement.
(B) Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder.
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including a reasonable attorney's fee, except in the event caused by Landlord's
negligence or willful misconduct.
33. WAIVER The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any
way affect, the right of either party to insist upon performance and observance
by the other party in strict accordance with the terms hereof.
34. NOTICES All notices, demands, requests, advices or designations which may
be or are required to be given by either party to the other hereunder shall be
in writing. All notices, demands, requests, advices or designations by Landlord
to Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises or if sent by United States certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillage, 2560 Mission College
Blvd., Suite 101, Santa Clara, CA 95054. Each notice, request, demand, advice or
designation referred to in this paragraph shall be deemed received on the date
of the personal service 3 days after or 3 days after mailing thereof in the
manner herein provided, as the case may be.
35. EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its
execution and delivery by both Landlord and Tenant.
36. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than thirty (30) days after written notice by Tenant to Landlord
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have heretofore been furnished to Tenant in
writing, specifying wherein Landlord has failed to perform such obligations;
provided, however, that if the nature of Landlord's obligations is such that
more than thirty (30) days are required for performance, then landlord shall
not be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion.
37. CORPORATE AUTHORITY If Tenant is a corporation, for a partnership each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or
partnership) in accordance with its terms. If Tenant is a corporation, Tenant
shall, within thirty (30) days after execution of this Lease, deliver to
Landlord a certified copy of the resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.
39. LIMITATION OF LIABILITY In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord and
Landlord's assets;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership)
(iii) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership)
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord.
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall
be applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or at common law.
page 7 of 8
<PAGE> 19
40. MISCELLANEOUS AND GENERAL PROVISIONS
a. Tenant shall not, without the written consent of Landlord, use the
name of the building for any purpose other than as the address of the
business conducted by Tenant in the Premises.
b. This Lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provision
of this Lease shall be invalid, unenforceable or ineffective for any
reason whatsoever, all other provisions hereof shall be and remain in
full force and effect.
c. The term "Premises" includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto. The
term "Landlord" or any pronoun used in place thereof includes the plural
as well as the singular and the successors and assigns of Landlord. The
term "Tenant" or any pronoun used in place thereof includes the plural
as well as the singular and individuals, firms, associations,
partnerships and corporations, and their and each of their respective
heirs, executors, administrators, successors and permitted assigns,
according to the context hereof, and the provisions of this Lease shall
inure to the benefit of and bind such heirs, executors, administrators,
successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words
used in any gender include other genders. If there be more than one
Tenant the obligations of Tenant hereunder are joint and several. The
paragraph headings of this Lease are for convenience of reference only
and shall have no effect upon the construction or interpretation of any
provision hereof.
d. Time is of the essence of this Lease and of each and all of its
provisions.
e. At the expiration or earlier termination of this Lease, Tenant shall
execute, acknowledge and deliver to Landlord, within ten (10) days after
written demand from Landlord to Tenant, any quitclaim deed or other
document required by any reputable title company, licensed to operate in
the State of California, to remove the cloud or encumbrance created by
this Lease from the real property of which Tenant's Premises are a part.
f. This instrument along with any exhibits and attachments hereto
constitutes the entire agreement between Landlord and Tenant relative to
the Premises and this agreement and the exhibits and attachments may be
altered, amended or revoked only by an instrument in writing signed by
both Landlord and Tenant. Landlord and Tenant agree hereby that all
prior or contemporaneous oral agreements between and among themselves
and their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this agreement.
g. Neither Landlord nor Tenant shall record this Lease or a short form
memorandum hereof without the consent of the other.
h. Tenant further agrees to execute any amendments required by a lender
to enable Landlord to obtain financing, so long as Tenant's rights
hereunder are not substantially affected.
i. Paragraphs 43 through 53 are added hereto and are included as a part
of this lease.
j. Clauses, plans and riders, if any, signed by Landlord and Tenant and
endorsed on or affixed to this Lease are a part hereof.
k. Tenant covenants and agrees that no diminution or shutting off of
light, air or view by any structure which may be hereafter erected
(whether or not by Landlord) shall in any way affect his Lease, entitle
Tenant to any reduction of rent hereunder or result in any liability of
Landlord to Tenant.
41. BROKERS Tenant warrants that it had dealings with only the following real
estate brokers or agents in connection with the negotiation of this Lease: none
and that it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.
42. SIGNS No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord. Tenant shall not place anything or allow anything to be placed
near the glass of any window, door partition or wall which may appear
unsightly from outside the Premises. Tenant may place a directional sign in
a location near the driveway preapproved by Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year first above written.
LANDLORD: TENANT:
JOHN ARRILLAGA SEPARATE ACCELGRAPHICS, INC.
PROPERTY TRUST a California Corporation
By /s/ John Arrillaga By /s/ Jeffrey W. Dunn
------------------------------ ----------------------------
John Arrillaga, Trustee Jeffrey W. Dunn, President and
Chief Executive Officer
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By /s/ Richard T. Peery
------------------------------
Richard T. Peery, Trustee
<PAGE> 20
Paragraphs 43 through 53 to Lease Agreement Dated December 16, 1994, By and
Between John Arrillaga and Richard T. Peery Separate Property Trusts, as
Landlord, and AccelGraphics, Inc., a California corporation, as Tenant for
12,833+/- Square Feet of Space Located at 1942 Zanker Road, San Jose, 95112.
43. BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum
of FOUR HUNDRED FIFTEEN THOUSAND SEVEN HUNDRED EIGHTY NINE AND 20/100 DOLLARS
($415,789.20), shall be payable as follows:
For the period of January 15, 1995 through March 31, 1995, no Basic Rent
shall be due; however, Tenant shall be responsible for all Additional Rent
expenses as outlined in Paragraph 4D from the Commencement Date of the Lease.
On April 1, 1995, the sum of TEN THOUSAND NINE HUNDRED EIGHT AND 05/100
DOLLARS ($10,908.05) shall be due, and a like sum due on the first day of each
month thereafter, through and including March 1, 1996.
On April 1, 1996, the sum of ELEVEN THOUSAND FIVE HUNDRED FORTY NINE AND
70/100 DOLLARS ($11,549.70) shall be due, and a like sum due on the first day of
each month thereafter, through and including March 1, 1997.
On April 1, 1997, the sum of TWELVE THOUSAND ONE HUNDRED NINETY ONE AND
35/100 DOLLARS ($12,191.35) shall be due, and a like sum due on the first day of
each month thereafter, through and including March 1, 1998; or until the entire
aggregate sum of FOUR HUNDRED FIFTEEN THOUSAND SEVEN HUNDRED EIGHTY NINE AND
20/100 DOLLARS ($415,789.20) has been paid.
44. "AS-IS" BASIS: Subject only to Landlord making the improvements shown on
Exhibit B to be attached hereto, it is hereby agreed that the Premises leased
hereunder is leased strictly on an "as-is" basis and in its present condition,
and in the configuration as shown on Exhibit B to be attached hereto, and by
reference made a part hereof It is specifically agreed between the parties that
after Landlord makes the interior improvements as shown on Exhibit B, Landlord
shall not be required to make, nor be responsible for any cost, in connection
with any repair, restoration, and/or improvement to the Premises in order for
this Lease to commence, or thereafter, throughout the Term of this Lease (except
as noted in Paragraphs 45 and 46). Landlord makes no warranty or representation
of any kind or nature whatsoever as to the condition or repair of the Premises,
nor as to the use or occupancy which may be made thereof.
<PAGE> 21
45. PUNCH LIST: In addition to and notwithstanding anything to the contrary in
Paragraphs 8 and 44 of this Lease, Tenant shall have thirty (30) days after the
Commencement Date to provide Landlord with a written "punch list" pertaining to
latent defects in the Building and in the interior improvements constructed by
Landlord for Tenant. Landlord shall have thirty (30) days thereafter (or longer
if necessary, provided Landlord is diligently pursuing the completion of the
same) to complete the "punch list" items without the Commencement Date of the
Lease and Tenant's obligation to pay Rental thereunder being affected.
Notwithstanding the foregoing, a crack in the foundation, or exterior walls that
does not endanger the structural integrity of the building, or which is not
life-threatening, shall not be considered material, nor shall Landlord be
responsible for repair of same. This Paragraph shall be of no force and effect
if Tenant shall fail to give any such notice to Landlord within thirty (30) days
after the commencement of the term of this Lease.
46. MAINTENANCE OF THE PREMISES: In addition to, and notwithstanding anything to
the contrary in Paragraph 10, Landlord shall maintain the structural shell,
foundation, and roof structure (but not the interior improvements, roof
membrane, subject to the conditions noted herein, or glazing) of the building
leased hereunder at Landlord's cost and expense provided Tenant has not caused
such damage, in which event Tenant shall be responsible for 100 percent of any
such costs for repair or damage so caused by the Tenant. Notwithstanding the
foregoing, a crack in the foundation, or exterior walls that does not endanger
the structural integrity of the building, or which is not life-threatening,
shall not be considered material, nor shall Landlord be responsible for repair
of same. During the first sixty (60) day period of the Lease Term, Landlord
shall be responsible for any costs for repair or damage to the roof membrane,
provided Tenant has not caused such damage, in which event Tenant shall be
responsible for one hundred (100%) percent of any such costs for repair or
damage to the roof membrane so caused by Tenant. Tenant shall be responsible for
paying its pro rata share for the cost of maintaining the roof membrane
throughout the Term of the Lease.
Landlord will be responsible for having made and for the payment of any
necessary repairs, as reasonably determined by Landlord, (excluding maintenance)
to the HVAC system, plumbing and standard electrical wiring during the first
sixty (60) day period in the initial Lease Term, provided however, any repair
resulting from Tenant's use will be paid for one hundred (100%) percent by
Tenant. Tenant shall notify Landlord of any such necessary repairs and Landlord
will approve such repairs and the related cost before such repairs are made.
47. INDEMNIFICATION: Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises or the Complex by
or from any cause whatsoever, including without limitation, gas, fire, oil,
electricity, or leakage of any character from the roof, walls, basement or other
portion of the Premises or the Complex but excluding, however, the willful
misconduct or negligence of Landlord, its agents, servants, employees, invitees,
or contractors so long as Landlord has first received notice of the
problem/defect resulting in injury, death, damage or destruction as a
consequence of its negligence and to the extent such damage or destruction can
be restored and Landlord has had a reasonable time in which to repair same,
provided, however, Landlord is responsible for repairing such damage under this
Lease. Except as to injury
<PAGE> 22
to persons or damage to property to the extent arising from the willful
misconduct or the negligence of Landlord, its agents, servants, employees,
invitees, or contractors, Tenant shall hold Landlord harmless from and defend
Landlord against any and all expenses, including reasonable attorneys' fees, in
connection therewith, arising out of any injury to or death of any person or
damage to or destruction of property occurring in, on or about the Premises, or
any part thereof, from any cause whatsoever.
48. ASSIGNMENT AND SUBLETTING CONTINUED: In addition to and notwithstanding
anything to the contrary in Paragraph 19 of this Lease, Tenant shall be entitled
to assign or sublet without Landlord's consent (but shall still give Landlord
notice thereof) to any parent or subsidiary corporation, or corporation with
which Tenant merges or consolidates, or to whom Tenant sells all or
substantially all of its assets, provided no such assignment or subletting will
release the Tenant from Tenant's obligations under this Lease.
49. SUBORDINATION, CONTINUED: Notwithstanding anything to the contrary in
Paragraph 20 of this Lease, Tenant shall not be required to subordinate unless
it receives an agreement enforceable by Tenant from the holder of the interest
to which this Lease is being subordinated that Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions of this Lease.
50. SALE OR CONVEYANCE BY LANDLORD, CONTINUED: Not withstanding anything
to the contrary in the Lease, if Landlord sells or otherwise convoys its
interest in the Premises, Landlord shall not be relieved of its obligation under
the Lease, unless and until Landlord transfers the balance of Tenant's Security
Deposit to its successor and the successor assumes in writing Landlord's
obligations under the Lease.
51. OPTION TO EXTEND LEASE FOR THREE (3) YEARS: Provided Tenant is not in
default (pursuant to Paragraph 22 of the Lease, i.e., Tenant has received notice
and any applicable cure period has expired without cure) of any of the terms,
covenants, and conditions of this Lease Agreement, Landlord hereby grants to
Tenant an Option to Extend this Lease Agreement for an additional three (3) year
period (the "Extended Term") upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of this
Option to Extend not later than September 30, 1997, in which event the Lease
shall be considered extended for an additional three (3) years upon the same
terms and conditions, absent this Paragraph 5 1, and subject to the Basic Rental
set forth below. In the event that Tenant timely exercise Tenant's option as set
forth herein in writing, Tenant shall have no further Option to Extend this
Lease, and this Lease shall continue in full force and effect for the remaining
term hereof, absent of this Paragraph 5 1.
B. The following summarizes the per square foot charge by period under the
Lease Agreement that would be applied to the Extended Term:
<PAGE> 23
<TABLE>
<CAPTION>
Monthly
Period PSF Rate Basic Rental
------ -------- ------------
<S> <C> <C>
04/01/98-03/31/99 $1.00 $12,833.00
04/01/99-03/31/00 $1.05 $13,474.65
04/01/00-03/31/01 $1.10 $14,116.30
</TABLE>
C. The option rights of Tenant under this Paragraph, and the Extended
Term thereunder, are granted for Tenant's personal benefit and may not be
assigned or transferred by Tenant, except to a parent corporation, subsidiary
corporation, or corporation with which Tenant merges or consolidates or to whom
Tenant sells all or substantially all of its assets as provided for in Paragraph
48, either voluntarily or by operation of law, in any manner whatsoever. In the
event that Landlord consents to a sublease or assignment under Paragraph 19, the
option granted herein and any Extended Term thereunder shall be void and of no
force and effect, whether or not Tenant shall have purported to exercise such
option prior to such assignment or sublease, except an assignment or sublease to
a parent corporation, subsidiary corporation, or corporation with which Tenant
merges or consolidates or to whom Tenant sells all or substantially all of its
assets.
D. INCREASED SECURITY DEPOSIT: In the event the term of Tenant's Lease
is extended pursuant to this Paragraph 51, Tenant's Security Deposit shall be
increased to equal the Basic Rental due for the last month of the Extended Term
($14,116.30).
52. CONSENT: Whenever the consent of one party to the other is required
hereunder, such consent shall not be unreasonably withheld.
53. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to
the existence or use of "Hazardous Materials" (as defined herein) on, in, under
or about the Premises and real property located beneath said Premises
(hereinafter collectively referred to as the "Property") and the Complex:
As used herein, the term "Hazardous Materials" shall mean any hazardous or toxic
substance, material or waste which is or becomes subject to or regulated by any
local governmental authority, the State of California, or the United States
Government. The term "Hazardous Materials" includes, without limitation any
material or hazardous substance which is (i) listed under Article 9 or defined
as "hazardous" or "extremely hazardous" pursuant to Article II of Title 22 of
the California Administrative Code, Division 4, Chapter 30, (ii) listed or
defined as a "hazardous waste" pursuant to the Federal Resource Conservation and
Recovery Act, Section 42 U.S.C. Section 6901 et. seq., (iii) listed or defined
as a "hazardous substance" pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C.
Section 9601), (iv) petroleum or any derivative of petroleum, or (v) asbestos.
Subject to the terms of this Paragraph 53, Tenant shall have no obligation to
"clean up", reimburse, release, indemnify, or defend Landlord with respect to
any Hazardous Materials which Tenant (prior to and during the term of the Lease)
or other parties on the Property (during the term of this Lease) did not store,
dispose, or transport in, use, or cause to be on the Property or the Complex in
violation of applicable law.
<PAGE> 24
Tenant will be 100 percent liable and responsible for: (i) any and all "cleanup"
of said Hazardous Materials contamination which Tenant, its agents, employees,
contractors, invitees or its future subtenants and/or assignees (if any), or
other parties on the Property, does store, dispose, or transport in, use or
cause to be on the Property and which Tenant, its agents, employees,
contractors, invitees or its future subtenants and/or assignees (if any), or
other parties on the Property, does store, dispose, or transport in, use or
cause to be on the Property, and (ii) any claims, including third party claims,
resulting from such Hazardous Materials contamination. Tenant shall indemnify
Landlord and hold Landlord harmless from any liabilities, demands, costs,
expenses and damages, including, without limitation, attorney fees incurred as a
result of any claims resulting from such Hazardous Materials contamination.
Tenant also agrees not to use or dispose of any Hazardous Materials on the
Property or the Complex without first obtaining Landlord's written consent. In
the event consent is granted by Landlord, Tenant agrees to complete compliance
with governmental regulations, and prior to the termination of said Lease Tenant
agrees to follow the proper closure procedures and will obtain a clearance from
the local fire department and/or the appropriate city agency. If Tenant uses
Hazardous Materials, Tenant also agrees to install, at Tenant's expense, such
Hazardous Materials monitoring devices as Landlord deems reasonably necessary.
It is agreed that the Tenant's responsibilities related to Hazardous Materials
will survive the termination date of the Lease and that Landlord may obtain
specific performance of Tenant's responsibilities under this Paragraph 53.
<PAGE> 25
SERVICE AGREEMENT
Altamonte Lakeside Executive Suites
Name of Client: ACCELGRAPHICS, INC. - John Caravello
Address: 1942 Zanker Road
City, State, ZIP: San Jose, California 95112-9704
Telephone: (408) 467-5013
THIS AGREEMENT is made between Altamonte Lakeside Executive Suites,
(hereinafter referred to as the "OWNER"), 283 N. North Lake Boulevard, Suite
111, Altamonte Springs, Florida 32701 and AccelGraphics, Inc. (hereinafter
referred to as the "Client"), whose address and telephone number are described
above.
OWNER and CLIENT hereby agree as follows:
1. Client is hereby given the right to use office number, 124 for a term of
twelve (12) months commencing on Apr. 19, 1996 and terminating on Apr. 30, 1997.
If Owner is unable to deliver possession of the office described herein to
CLIENT on the commencement date, OWNER will not be liable for any resulting
damage, and CLIENT will not have to pay the basic charged (as specified herein)
until OWNER can deliver possession. Upon completion of the initial term, this
Agreement shall continue on a six month basis with thirty (30) days written
notice prior to end of term required by either party to terminate.
2. During the term of this Agreement, the basic monthly charges are as follows:
<TABLE>
<S> <C>
Office Package $ 400.00
---------
Sales Tax (7%) $ 28.00
---------
Furniture Package (See attached itemized scheduled $ 00.00
---------
Sales Tax (7%) $ 0.00
---------
Telephone Instrument Rental (Type:______________) $ 00.00
---------
Telephone Answering (See Exhibit A) $ 40.00
---------
Own Fax Machine $ 00.00
---------
Total Basic Monthly Payment $ 468.00
---------
</TABLE>
The above Basic Monthly Office Package includes the following:
Use of Office Coffee Service
Use of Reception Area ABC Switch Access
Incoming Mail Delivery
Four (4) Hours Use of Conference/Meeting room time for each office rented. (This
allowance is not cumulative from one month to another.) Additional use of
conference/meeting room is available at the prevailing rate of $5.00/hour.
<PAGE> 26
Rates, and the services offered, are subject to change without notice. Rent
Reviews occur annually. The increase in "basic monthly office rental" upon
renewal of this agreement will be approximately 8%.
5. Client will receive an invoice approximately 10 calendar days prior to
the beginning of the next month. This will be for the upcoming months
rent, plus services used from the 16th day of the previous month to the
15th day of the current month, and is due upon receipt. Payment is to
be delivered to the Manager no later than 5:00 p.m. on the last day of
the current month, without making any deduction or offsets. Should a
discrepancy exist, the matter should immediately be brought to the
Manager's attention. Payments made after that deadline will be subject
to a 5% late payment fee. Payments not received by the 10th day of the
upcoming month may cause cancellation of service, including loss of
access to the office space. Should a check be returned for any reason,
Client will pay an additional charge of $30 per returned check and the
OWNER shall have the right to cancel all services until the check is
made good and the additional charge paid.
Payments made by mail should be addressed to:
ALTAMONTE LAKESIDE EXECUTIVE SUITES
283 N. NORTH LAKE BLVD., SUITE 111
ALTAMONTE SPRINGS, FT, 32701-3437
4. Concurrent with the execution of this Agreement, CLIENT will pay OWNER the
following:
<TABLE>
<S> <C>
Administrative Set-Up Charge $ 50.00
---------
Telephone Line Installation Charge $ 45.00
---------
Telephone Instrument Deposit $ 00.00
---------
First month's office rent, incl. tax $ 428.00
---------
First month's furniture rental, incl. tax $ 00.00
---------
First months telephone instrumental rental $ 00.00
---------
First months telephone answering charge $ 40.00
---------
First months charge for own fax machine $ 00.00
---------
Security Deposit (Refundable) $ 425.00
---------
Key Deposit (Refundable) $ 5.00
---------
Entry Card Deposit (Refundable) 2 cards $ 40.00
---------
TOTAL $1,033.00
---------
</TABLE>
5. CLIENT agrees that:
(a) CLIENT will use the premises for general office purposes and
for no other purpose. CLIENT agrees that CLIENT will not offer
or use the premises to provide to others services provided by
OWNER to OWNER'S clients, nor make nor permit use of the
premises which is forbidden by law or regulation, or may be
hazardous or unsafe, or may invalidate or increase the premium
of any policy of insurance carried on
<PAGE> 27
the premises or may tend to impair the character, reputation,
appearance or operation of the premises.
(b) OWNER has made no promise to alter or improve the premises or
made any representation concerning the condition thereof. By
taking possession of the premises, CLIENT acknowledges that
they are in good order and condition. CLIENT will maintain the
premises in good condition and repair, will not make holes in
walls for any mason, or cause or permit the premises to be
damaged or defaced. CLIENT will make no alterations or
additions to the premises without OWNER'S prior written
consent. CLIENT will return the premises and any furniture
contracted for hereunder at the end of this Agreement in as
good condition and repair as when CLIENT received the premises
or such furniture, as the case may be, normal wear and tear
excepted. CLIENT shall provide, at CLIENT'S expense, a plastic
chair mat of the type normally used on the premises and will.
use it at all, times. OWNER may, but is not required to, make
repairs or replacements for CLIENT'S account, and CLIENT will
pay to OWNER all costs and expenses thereof upon demand.
(c) CLIENT shall not permit their office to be occupied by any
person except CLIENT'S employees and business invitees. CLIENT
acknowledges that the exclusion of young children and pets
from the premises is necessary to maintain the professional
environment. Co-tenancy, defined as sharing of an office, is
not permitted without Management's consent. Your office key
and Security Entry Card are not to be loaned to anyone. Use of
the facilities and services available at Altamonte Lakeside
Executive Suites are for our CLIENTS only. CLIENTS do not have
the authority to grant access to these facilities to other
persons.
(d) OWNER has the right, at any time, and upon reasonable notice,
to enter the premises to inspect them, to provide services to
be famished by OWNER, to make repairs and alterations to the
premises and to show the premises to prospective clients.
(e) Should CLIENT continue in possession of the premises after
expiration or termination of this Agreement without OWNER'S
consent, CLIENT shall be obligated to pay an amount equal to
two (2) times the basic charge in effect at the time of such
expiration or termination, until such possession is
surrendered. OWNER shall be entitled to exercise all remedies
available to OWNER on account of such continued possession,
and CLIENT'S obligation to pay such doubled basic charge shall
be in addition and without prejudice to such remedies.
(f) CLIENT'S Answering Service requirements are as shown in the
Agreement, Exhibit A, which sets forth the name and title of
the individuals authorized to use the services. This agreement
will run concurrently with the Service Agreement.
<PAGE> 28
(g) No advertising of any type using the address of the premises
may be used by CLIENT without the prior written approval of
OWNER.
(h) CLIENT will MI out and sign additional documents and do such
other things as may be required by OWNER, Postal Service,
telephone company, or other entity in order to permit OWNER to
provide services and facilities pursuant to this Agreement.
(i) CLIENT agrees by signing this Agreement that he win abide by
the Rules And Regulations as described in the 'Orientation
Document' (see Exhibit B). CLIENT will comply with an rules,
regulations, and requirements established by OWNER relating to
the premises and CLIENT'S use thereof. OWNER will have no
responsibility to CLIENT for violation of any rules and
regulations by any other client of OWNER.
(j) If CLIENT vacates or abandons the premises, or if CLIENT is
dispossessed by process of law or otherwise, personal property
belonging to Client and left on the premises will be
considered abandoned or, at OWNER'S option, OWNER may store it
in CLIENT'S name, at CLIENT'S cost and without notice to
CLIENT
(k) CLIENT will defend, indemnify, and hold harmless OWNER and its
respective officers, employees and agents, from any and all
claims, liabilities, or loss, and all damages, direct or
consequential incurred by OWNER, or any other person, and an
costs and expenses including attorney's fees arising in any
manner, directly or indirectly, out of or in connection with
or incident to (1) any injury to or death of persons
including, but not limited to, CLIENT and employees and
invitees of CLIENT, or any damage to or destruction of
property, including, but not limited to, property of CLIENT
and employees and invitees of CLIENT occurring on or about the
premises, except to the extent that such claims , losses, or
damages are the result of the negligence of OWNER or its
officers, employees or agents, or (2) the furnishing to, or
use by, Client, authorized persons, or employees and invitees
of any of them of any services or facilities (which term as
used herein includes occupancy of the premises hereunder).
CLIENT shall maintain adequate insurance for the foregoing.
(l) All services and facilities (which term includes occupancy of
the premises) provided pursuant to this Agreement are
furnished without warranty of any sort whatsoever. CLIENT'S
sole remedy, and OWNER'S sole obligation, for any failure to
render any service or facility, any error or omission, or any
delay or interruption with respect thereto is limited to an
adjustment to CLIENT'S billing in an amount equal to the
charge for such service or facility for the period during
which the failure, delay or interruption continues. With the
sole- exception of the remedy set forth in the first two
sentences of this subparagraph (1), CLIENT EXPRESSLY AGREES TO
WAIVE, AND AGREES NOT TO MAKE, ANY CLAIM FOR DAMAGES, DIRECT
OR CONSEQUENTIAL, ARISING OUT
<PAGE> 29
OF ANY FAILURE TO FURNISH ANY SERVICE OR FACILITY, ANY ERROR
OR OMISSION WITH RESPECT THERETO, OR ANY DELAY OR INTERRUPTION
OF THE SAME. NOTWITHSTANDING ANYTHING IN THIS SUBPARAGRAPH,
THERE SHALL BE NO BILLING ADJUSTMENT IF CLIENT IS IN DEFAULT
HEREUNDER.
6. Subject to paragraph 5(g) above, CLIENT is hereby authorized to use the
address of the premises as CLIENT'S business address. CLIENT
acknowledges that CLIENT has read and understood United States Postal
Service Form #1583 and understands that in the event CLIENT'S use of
this address terminates, it will be CLIENT'S responsibility to notify
all parties of termination of the use of the above-described address.
In the event that this Agreement terminates or any or all charges are
not kept current, OWNER may terminate CLIENT'S right to use the address
of the premises and at OWNER'S election and upon reasonable notice may
return all mail to senders.
7. If CLIENT does, not pay any sum payable by CLIENT to OWNER within ten
(10) days after it becomes due and payable, or if CLIENT fails to
perform any of CLIENT'S other agreements and does not cure such other
failure within five (5) days after written notice to CLIENT from OWNER,
OWNER will have the right, with or without notice to CLIENT, in
addition to and not in lieu of other remedies available, to terminate
all of Client's rights under this Agreement, or such of those rights as
OWNER designates in the written notice. If Client's rights under this
Agreement are so terminated, OWNER may, after complying with any
applicable requirements of law, take possession of the premises. Upon
any such action by OWNER, CLIENT will remain liable for all obligations
which have previously accrued, and, to the maximum extent permitted by
law, for all obligations which may subsequently accrue.
8. CLIENT shall comply with all laws, permit and licensing rules, and
other requirements regulating the conduct of CLIENT'S business.
9. If CLIENT fails to Perform any of CLIENT'S obligations hereunder when
performance is due, or abandons the premises, OWNER may apply the
security deposit to the payment of any basic charge or any other
payment due from CLIENT, or of any sum which OWNER may spend or be
required to spend by reason of CLIENT'S failure. Upon written demand by
OWNER, CLIENT will pay to OWNER any amount so applied so that the
security deposit is replenished. If at the end of the term of this
Agreement, CLIENT has performed all of the provisions of this
Agreement, the security deposit, or any remaining balance, will be
returned to CLIENT without interest.
10. CLIENT may not assign this Agreement, in whole or in part, without the
written approval of OWNER. All provisions of this Agreement are for the
benefit of, and are binding upon, CLIENT'S approved successors and
assigns and those of OWNER.
11. CLIENT acknowledges that during the term of this Agreement, OWNER will
be furnishing services to CLIENT and other clients on the premises
through OWNER'S employees. CLIENT
<PAGE> 30
acknowledges and agrees that the loss of an employee would cause
damages and expenses to OWNER in obtaining a replacement. CLIENT
therefore agrees that should CLIENT hire any of OWNER'S employees
during the term of this Agreement, or for six (6) months after CLIENTS
termination, thereby causing OWNER to lose service of that employee,
CLIENT will pay to OWNER an amount equal to the sum of 25% of the
annual compensation of the first year's employment for that employee.
It being mutually agreed by CLIENT and OWNER that this provision of
liquidated damages is reasonable and the actual damages sustained by
OWNER as a result of these actions would be impractical or extremely
difficult to establish.
12. In the event of any legal action or proceeding by CLIENT or OWNER
against the other under this Agreement, the prevailing party shall be
entitled to recover all expenses and costs, including reasonable
attorney's fees and costs of appeal.
13. All notices by CLIENT or OWNER to the other must be in writing. Notices
to CLIENT will be considered given if delivered personally to one of
CLIENT'S officers or mailed by registered or certified mail, postage
prepaid, addressed to CLIENT at the premises. Notices to OWNER will be
considered given if mailed by registered or certified mail, postage
prepaid, to OWNER at OWNER'S address set forth in this Agreement, or
such other address as OWNER shall designate to CLIENT in writing.
14. The invalidity or unenforceability of any provision hereof shall not
affect or impair validity of any other provision. No waiver of any
default of CLIENT shall be implied from any failure by OWNER to take
action with respect to such default.
15. OWNER expressly reserves the right at OWNER'S expense, to remove CLIENT
from the rented office and relocate CLIENT to another office of OWNER'S
choosing, of approximately the same dimensions and size, within the
Suite. CLIENT agrees that OWNER'S exercise of its election to remove
and relocate CLIENT shall not terminate this Agreement or release
CLIENT, in whole or in part, from CLIENT'S obligation to pay rent and
perform agreements hereunder for the full term of this Agreement.
16. THIS AGREEMENT IS NOT A LEASE. CLIENT IS GRANTED A REVOCABLE LICENSE TO
USE THE FACILITIES INCLUDED IN THE APPLICABLE SCHEDULE. CLIENT SHALL
HAVE NO REAL PROPERTY INTEREST IN OR TO THE PREMISES.
17. This Agreement supersedes any prior agreement and embodies the entire
agreement between CLIENT and OWNER, and may not be modified, changed or
altered in any way except in writing.
<PAGE> 31
This Agreement shall be interpreted and enforced in accordance with the laws of
the State of Florida.
Witnessed by: Owner: Altamonte Lakeside Executive Suites
/s/ S. Golden By: /s/ C. O'Neal
________________________________ ___________________________________________
4/1/96 Date: 4/1/96
________________________________ ___________________________________________
Witnessed by: Client: AccelGraphics, Inc.
/s/ By: /s/ Nancy E. Bush
________________________________ ___________________________________________
4/4/96 Date: 4/4/96
________________________________ ___________________________________________
<PAGE> 32
Altamonte Lakeside Executive Suites
Exhibit A
Answering Service Agreement
Type of Answering Service Number of Lines and Price/Month
<TABLE>
<CAPTION>
1 2 3 4
<S> <C> <C> <C> <C>
Standard Service $40 $ 60 $ 70 $ 80
All lines answered In your name
All messages saved on voice mail
Executive Service $60 $ 80 $100 $115
All lines answered in your name
All calls screened
Messages saved on mix of voicemail and by hand
Agreed categories of messages forwarded to you immediately
Voice mail used when switchboard closed
Ultimate Service $80 $105 $125 $150
All lines answered in your name
All messages saved by hand
All messages forwarded to you Immediately
Voice mail used when switchboard Ls closed
We check your voice mail each morning and pass messages to you
Client's Answering Service Requirement
Individual's Authorized to use Service
Name to be used in Answering Incoming Calls:
Service chosen on 2 lines.
</TABLE>
<PAGE> 1
EXHIBIT 10.9
ACCELGRAPHICS, INC.
DIGITAL EQUIPMENT CORPORATION OEM AGREEMENT
This OEM Agreement (the "AGREEMENT") is entered into as of February 21, 1996 by
and between AccelGraphics, Inc., a California corporation ("ACCELGRAPHICS"), and
Digital Equipment Corporation, ("OEM"). The effective date ("EFFECTIVE DATE")
shall be the last date on which an authorized representative of the parties
signed below.
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS AND EXHIBITS
1.1 Confidential Information. The term "CONFIDENTIAL INFORMATION" shall mean any
information disclosed by one party to the other pursuant to this Agreement which
is in written, graphic, machine readable or other tangible form and is marked
"Confidential", "Proprietary" or in some other manner to indicate its
confidential nature, including, without limitation, technical information not
included in the Documentation related to the Products, customer lists, marketing
plans, financial information and the terms of this Agreement. Confidential
Information may also include oral information disclosed by one party to the
other pursuant to this Agreement, provided that such information is designated
as confidential at the time of disclosure and is reduced to writing by the
disclosing party within a reasonable time (not to exceed thirty (30) days) after
its oral disclosure, and such writing is marked in a manner to indicate its
confidential nature and delivered to the receiving party. Notwithstanding any
failure to so identify it, however, all Software source code shall be
AccelGraphics Confidential Information.
1.2 Distributor. The term "DISTRIBUTOR" shall mean a person or entity that sells
computer hardware or software directly to End Customers or to resellers who sell
directly to End Customers.
1.3 Documentation. The term "DOCUMENTATION" shall mean written materials or
graphic files (including, without limitation, to user manuals promotional
brochures, and materials useful for design) that are displayed or printed and
relate to or support Products.
1.4 End Customer. The term "END CUSTOMER" shall mean any third party which
obtains a unit of the Product solely for its own internal business purposes and
not for further distribution or resale.
1.5 End Customer License. The term "END CUSTOMER LICENSE" shall mean such End
Customer License in the form attached as Exhibit B.
1.6 Initial Term. The term "INITIAL TERM" shall mean the first two-year term of
this Agreement commencing on the Effective Date and ending on the first
anniversary of the Effective Date.
1.7 Products. The term "PRODUCTS" shall mean those Products manufactured and/or
sold by AccelGraphics as described on Exhibit A attached hereto.
1.8 Proprietary Rights. The term "PROPRIETARY RIGHTS" shall mean all rights held
by AccelGraphics in the Products and its Confidential Information, including,
without limitation, patents, copyrights, author's rights, trademarks, trade
names, know-how and trade secrets, irrespective of whether such rights arise
under U.S. or international intellectual property, unfair competition or trade
secret laws.
1.9 Software. The term "SOFTWARE" shall mean any software, computer program,
source code, object code, listing or related material in machine-readable or
printed form (including firmware and all types of media), or any updates and
modifications thereto, that are included in the Products.
1.10 Specifications. The term "SPECIFICATIONS" shall mean the Product
specifications set forth in Exhibit C.
<PAGE> 2
1.11 Exhibits. The following attached Exhibits shall be made part of this
Agreement:
A - Products and Pricing
B - End Customer License
C - Product Specifications
D - OEM Pricing Forecast
F - Product Warranty
G - OEM Warranty Procedure
H - OEM Tax Exemption Certificate
2. PRODUCTS
2.1 Products. The products covered by this Agreement shall be those products
listed in Exhibit A. AccelGraphics shall not be under the obligation to continue
the production of any Product which has a replacement product available which is
backwards compatible.
3. CERTIFICATION, LICENSES AND LIMITATIONS
3.1 OEM Certification. OEM certifies that each and every Product to be purchased
under this Agreement will be purchased on its behalf as an original equipment
manufacturer and that each and every Product will be incorporated by OEM into
another system or product that OEM assembles or sells as a spare part for such
"system", for sale or lease, in the regular course of OEM's business. OEM
further certifies that the system or product into which each and every Product
is incorporated will include a hardware computer system supplied by OEM unless
the Product is sold as a spare part for such system. OEM agrees that Products
intended for other purposes shall not be purchased under this Agreement. Upon
AccelGraphics' request, OEM shall furnish to AccelGraphics evidence of
compliance with the provisions of this Section 3. 1.
3.2 License Grants. Subject to the terms, conditions, and restrictions of this
Agreement, AccelGraphics hereby grants to OEM, under AccelGraphics' Proprietary
Rights in the Products, a nonexclusive license, without right to sublicense
except as set forth in Section 4. 1, to (i) use and distribute the Products
obtained from AccelGraphics hereunder, in the form in which such units are
delivered to OEM; (ii) copy the Documentation, solely in order to produce
collateral and technical manuals for the Products, and (iii) reproduce or have
reproduced in object code form only, the Software distributed by AccelGraphics
as necessary for use and distribution of the Products.
3.3 Purchase of Products Subject to Software License and Other Restrictions. The
sale of each Product to OEM and the transfer of title for each purchased Product
to OEM shall not include a sale of any Software or a transfer of any Software
title to OEM. Instead, subject to the terms, conditions and restrictions of this
Agreement, the sale of each Product shall include a fully paid license for OEM
to use and distribute the Software directly to End Customers or to Distributors.
AccelGraphics shall retain full title to the Software and all copies thereof,
and OEM and End Customers may use the Software only in accordance with the
provisions of the End Customer License. Neither OEM, its Distributors nor the
End Customers shall have any access to or rights in the Software source codes,
and OEM agrees that it shall not decompile, reverse engineer or otherwise
attempt to gain access to the Software source code. Except as specifically
provided in this Agreement, neither OEM, its Distributors nor the End Customers
shall have the right to copy, modify or remanufacture any Product or part
thereof.
<PAGE> 3
3.4 License to Manufacture Under Certain Conditions. If, during the term of this
agreement, AccelGraphics is unable to supply OEM with the quantity of Products
required by OEM pursuant to the terms of OEM's Purchase Orders in accordance
with the provisions of this Agreement for a period of sixty (60) days or more
after the scheduled delivery date, Seller shall grant to OEM, solely for the
purposes of manufacturing the Products, a license under all of Seller's
Intellectual Property Rights, with the right to sublicense, required by OEM to
manufacture the Products. Upon OEM's demand, AccelGraphics will forthwith
forward to OEM all required technology, including, without limitation, source
code for all software. Seller will also make available to OEM all necessary
technical assistance required by OEM to manufacture or have manufactured
AccelGraphics' Products hereunder and will ensure that OEM has ready access to
all required tooling and sources of material supply. If OEM does not use
AccelGraphics' current licensed manufacturers to manufacture the Products, OEM
shall be responsible for all out of pocket expenses incurred by AccelGraphics'
over $5,000, which have been previously authorized in writing by OEM. In the
event AccelGraphics demonstrates its ability and readiness to resume its
obligations under this Agreement, then OEM or its third-party designee shall
return within 90 days to AccelGraphics all information provided by AccelGraphics
under this paragraph and at that point all licenses to OEM of AccelGraphics'
Intellectual Property Rights pursuant to this paragraph shall immediately
terminate. Notwithstanding the above, OEM is not prohibited from manufacturing
or procuring any product providing AccelGraphics' intellectual property rights
are not infringed.
4. PRODUCT DISTRIBUTION
4.1 End Customer Licensing. Subject to the terms, conditions, and restrictions
of this Agreement, OEM and its Distributors shall distribute the Products to End
Customers with all related Product Documentation and the End Customer License.
4.2 Distribution Channels. Subject to the terms, conditions, and restrictions of
this Agreement, OEM shall be entitled to distribute the Products directly to End
Customers or to Distributors; provided, that OEM shall ensure that each
Distributor adheres to, and does not perform any act inconsistent with, the
terms and conditions of this Agreement.
4.3 Marketing. OEM shall use reasonable efforts to market, and distribute the
Products.
5. PRICING
5.1 Pricing. AccelGraphics' Product pricing is set forth in Exhibit A. Subject
to Section 7.4 and provided OEM complies with all terms, conditions and
restrictions of this Agreement, AccelGraphics agrees to grant OEM the discounts
as specified in Exhibit A.
5.2 Price Changes. AccelGraphics shall have the right to revise the prices set
forth in Exhibit A upon [* * * *] written notice to OEM. Price increases shall
apply to all purchase orders received after the effective date of such price
increases. Price decreases shall apply to all accepted but unshipped orders
existing on the effective date of such decrease, and to all purchase orders
received after the effective date of such decreases.
5.3 Promotional Pricing and Marketing. AccelGraphics may, from time to time,
offer special "Promotional Pricing" and/or "Promotional Marketing Programs"
which will be effective for specified time periods in which OEM may be asked to
participate. Promotional Pricing is not considered a price decrease for purposes
of Section 5.2.
6. FORECAST
6.1 Forecasts. During the term of this Agreement, OEM shall provide
AccelGraphics with a good faith non binding rolling [* * *] forecast, updated [*
* *] by [* * *], for units of the Products to be provided by AccelGraphics to
OEM hereunder during each [* * *].
<PAGE> 4
7. PRICING REVIEW PERIOD
7.1 Pricing Review Period. Every [* * *] starting from the start date of the
contract, AccelGraphics and OEM will review products purchased versus the
contract pricing. If the quantities purchased do not meet or exceed the agreed
upon levels in Exhibit D the contract pricing will be renegotiated. if contract
pricing is not agreed upon, AccelGraphics may cancel the contract with 30 days
notice.
8. ORDER, ACCEPTANCE AND PAYMENT
8.1 Orders. OEM shall initiate purchases under this Agreement by submitting
written purchase orders to AccelGraphics. Such orders shall state unit
quantities, unit descriptions, required delivery dates, and shipping
instructions. AccelGraphics may accept or reject any order in its sole
discretion. AccelGraphics' acceptance of a OEM order will be evidenced by
AccelGraphics' issuance of a sales order acknowledgment form. Such sales order
acknowledgment form will be issued within ten (10) days after AccelGraphics'
receipt of OEM's order. All orders for Products shipped to OEM by AccelGraphics
shall be subject to the terms and conditions of this Agreement. Any purchase
order which purports to supersede or otherwise modify this Agreement shall be of
no force or effect.
8.2 Lead Times and Delivery Dates. OEM shall submit purchase orders to
AccelGraphics in accordance with a lead time of (i) [* * *], if such purchase
orders are for quantities of Products forecasted by OEM pursuant to Section 6.
1, or (ii) such other lead times to OEM, if such purchase orders are for
quantities of Products not forecasted by OEM pursuant to Section 6.1 are:
<TABLE>
<CAPTION>
Percent above Forecast Lead Time
---------------------- ---------
<S> <C>
[* * * * *] [* * *]
[* * * * *] [* * *]
[* * * * *] [* * *]
[* * * * *] [* * *]
[* * * * *] [* * *]
</TABLE>
AccelGraphics shall use commercially reasonable efforts to deliver the Product
at the times set forth in AccelGraphics' written acceptances of OEM's purchase
orders. AccelGraphics shall notify OEM in a timely manner if a Product delivery
schedule previously accepted by both parties cannot be met by AccelGraphics, and
shall provide, in such instances, a new delivery date on which AccelGraphics
shall be able to deliver such Products.
8.3 Shipping. Unless otherwise specified by OEM and agreed to by AccelGraphics,
such Products shall be shipped by AccelGraphics in conformance with
AccelGraphics' standard shipping procedures. All Products delivered by
AccelGraphics shall be F.O.B. AccelGraphics' manufacturing plant (the "SHIPPING
POINT"), at which time risk of loss shall pass to OEM. All customs, duties,
freight, insurance and other shipping expenses from Shipping Point, as well as
other special packaging expenses requested by OEM, shall be borne by OEM. OEM
agrees to satisfy all import formalities pertaining to shipment of units of the
Product to destinations outside the United States.
8.4 Acceptance and Rejection. OEM shall inspect all Products promptly upon
receipt thereof and may reject any Product that fails in any material way to
meet the Specifications. Any Product not properly rejected within ten (10) days
after receipt of that Product by OEM (the "REJECTION PERIOD") shall be deemed
accepted. To reject a Product, OEM shall, within the Rejection Period, notify
AccelGraphics in writing or by facsimile of its rejection and request a Returned
Material Authorization ("RMA") number. AccelGraphics shall use its best efforts
to provide the RMA number in writing or by facsimile to OEM within five (5) days
after receipt of the request. Within ten (10) days after receipt of the RMA
number, OEM shall return to AccelGraphics the rejected Product, freight prepaid,
in its original shipping carton with the RMA number displayed on the outside of
the carton. Provided that AccelGraphics has complied with its obligations in
this Section 8.4, AccelGraphics reserves the right to refuse to accept any
rejected Product that does not bear an RMA number on the outside of its carton.
As
<PAGE> 5
promptly as possible, but no later than thirty (30) days after receipt by
AccelGraphics of properly rejected Products, AccelGraphics shall, at its option
and expense, either repair or replace the Products. AccelGraphics shall pay the
shipping charges back to OEM for properly rejected Products; otherwise, OEM
shall be responsible for the shipping charges.
8.5 Return of Products after Rejection Period. Unless a Product is returned in
accordance with the provisions of AccelGraphics' standard warranty for the
Product described in Section 13.1 below, after the Rejection Period, OEM may not
return a Product to AccelGraphics for any reason without AccelGraphics' prior
written consent. For any Product for which AccelGraphics gives such consent,
AccelGraphics shall charge OEM a restocking fee equal to [* * *] of OEM's
purchase price for that Product and shall credit the balance of the purchase
price to OEM's account. OEM shall be responsible for all shipping charges.
8.6 Payment Terms. AccelGraphics shall submit an invoice to OEM upon shipment of
each Product ordered by OEM. The invoice shall cover OEM's purchase price for
the Products in a given shipment plus any freight, taxes or other applicable
costs initially paid by AccelGraphics but to be borne by OEM. The full invoiced
amount for each shipment of Products shall be paid thirty (30) days from the
date of invoice if OEM's credit standing is approved by AccelGraphics.
AccelGraphics reserves the right to change the credit terms provided herein if,
in AccelGraphics' sole discretion, such a change is warranted by OEM's financial
condition and payment history. All payments shall be made in U.S. Dollars.
8.7 Taxes. All prices are exclusive of any export, federal, state and local
taxes, duties or excises other than taxes based on AccelGraphics' net income. If
AccelGraphics pays any taxes, duties or excises which are not included in prices
charged for the Product, AccelGraphics shall itemize such taxes, duties or
excises as a separate item on its invoices to OEM, and OEM shall reimburse
AccelGraphics for such taxes, duties or excises; provided, that OEM shall not be
required to make any such reimbursement if it provides a then-current and valid
tax exemption certificate to AccelGraphics. Such certificate may be attached as
Exhibit G. OEM shall immediately notify AccelGraphics if any tax exemption
certificate which OEM has supplied to AccelGraphics becomes invalid.
8.8 Security Interest. AccelGraphics hereby reserves, and OEM hereby grants to
AccelGraphics, a purchase money security interest in each Product sold under
this Agreement. If OEM sells or leases such Product to another party prior to
OEM's paying the full amount of OEM's purchase price for such Product, then the
security interest shall cover the proceeds from such sale or lease. A security
interest in a Product will be satisfied by payment in full of OEM's purchase
price for such Product. OEM hereby appoints AccelGraphics as its
attorney-in-fact to execute, on OEM's behalf and in OEM's name, financing
statements and other instruments to perfect AccelGraphics' security interest in
each Product for the amount of OEM's purchase price for such Product. A copy of
this Agreement may be filed with the appropriate authorities at any time after
its execution as a financing statement or chattel mortgage to perfect
AccelGraphics' security interest.
9. RESCHEDULE AND CANCELLATION
9.1 Reschedule. Except for the Initial Purchase Order, OEM may reschedule any
order without a cancellation fee by delivering written notice to AccelGraphics
at least [* * *] before the scheduled shipment date, provided that (i) the
rescheduled delivery date is not more than [* * *] after the original delivery
date and (ii) [* * *].
9.2 Cancellation Fee. Except for the Initial Purchase Order, OEM may cancel any
order without a cancellation fee by delivering written notice to AccelGraphics
at least [* * *] before the scheduled shipment date. OEM agrees to pay
AccelGraphics a cancellation charge of [* * *] of the net price of each Product
canceled, for any order canceled with less than [* * *] notice to AccelGraphics.
10. OBSOLESCENCE AND ENGINEERING MODIFICATIONS
10.1 Obsolescence. AccelGraphics reserves the right to modify, alter, improve,
change or discontinue any or all of Products covered by this Agreement upon
written notice to OEM.
<PAGE> 6
10.2 Engineering Modifications. AccelGraphics will give OEM [* * *] advance
notice of all engineering modifications that will affect Products in OEM's
inventory if such changes affect form, fit or function. If these modifications
make it difficult for OEM to sell this inventory, AccelGraphics will work with
OEM to move the affected inventory through resale channels. OEM may cancel with
out charge any of the affected product on order after notification, up to [* *
*] days before scheduled delivery date.
11. SUPPORT AND TRAINING
11.1 End Customer Support. OEM shall be responsible for supporting all Product
that it distributes, or causes to be distributed, to End Customers, and for
otherwise interfacing with End Customers. OEM shall have no right, without
certification and written approval by AccelGraphics, to conduct warranty repairs
on Products. OEM shall not represent to any third party that AccelGraphics is
available to answer questions from such third party regarding the Product.
11.2 AccelGraphics Support to OEM. AccelGraphics will provide reasonable
consultation via telephone, facsimile and electronic mail to OEM during
AccelGraphics' normal business hours with respect to any Distributor or End
Customer questions that OEM cannot adequately answer.
12. LIMITED WARRANTIES
12.1 Limited Warranties. AccelGraphics' Standard Graphics Accelerator Board
Warranty and Standard Software Warranty are set forth in Exhibit E. The warranty
return procedure is outlined in Exhibit F ACCELGRAPHICS' WARRANTIES STATED IN
EXHIBIT E ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
13. OWNERSHIP OF PROPRIETARY RIGHTS
13.1 Ownership of Proprietary Rights. OEM acknowledges that the Products are
proprietary to AccelGraphics and that AccelGraphics retains exclusive ownership
of Products and all Proprietary Rights associated with Products. OEM shall take
all reasonable measures to protect AccelGraphics' Proprietary Rights in the
Products. Except as expressly provided in this Agreement, OEM is not granted any
other rights or licenses to patents, copyrights, trade secrets or trademarks
concerning Products. OEM shall promptly notify AccelGraphics in writing upon its
discovery of any unauthorized use of the Products or infringement of the
Products or AccelGraphics' Proprietary Rights. OEM shall not sell to any End
Customer if OEM has notified AccelGraphics that such Customer may be involved in
potential unauthorized use of Products or other infringement of AccelGraphics'
Proprietary Rights.
14. CONFIDENTIALITY
14.1 Confidentiality. Each party shall treat as confidential all Confidential
Information of the other party, shall not use such Confidential Information
except as set forth herein, and shall use reasonable efforts not to disclose
such Confidential Information to any third party. Without limiting the
foregoing, each of the parties shall use at least the same degree of care which
it uses to prevent the disclosure of its own confidential information of like
importance to prevent the disclosure of Confidential Information disclosed to it
by the other party under this Agreement. Each party shall promptly notify the
other party of any actual or suspected misuse or unauthorized disclosure of the
other party's Confidential Information. OEM shall not publish any technical
description of Products beyond the description published by AccelGraphics.
14.2 Exceptions. Notwithstanding the above, neither party shall have liability
to the other with regard to any Confidential Information of the other which the
receiving party can prove: (i) was publicly available through no fault of the
receiving party; (ii) was known to the receiving party, without restriction, at
the time of disclosure, as demonstrated by files in existence at the time of
disclosure; (iii) was known to the receiving party, without restriction, from a
source other than the disclosing party without breach of this Agreement by the
receiving party
<PAGE> 7
and otherwise not in violation of the disclosing party's rights; or (iv) was
independently developed by the receiving party without any use of the
Confidential Information, as demonstrated by files created at the time of such
independent development.
14.3 Confidentiality of this Agreement. Each party shall be entitled to disclose
the existence of this Agreement, but agrees that the terms and conditions of
this Agreement shall be treated as Confidential Information and shall not be
disclosed to any third party; provided, however, that each party may disclose
the terms and conditions of this Agreement: (i) as required by any court or
other governmental body; (ii) as otherwise required by law; (iii) to legal
counsel of the parties; (iv) in confidence, to accountants, banks, and financing
sources and their advisors; (v) in connection with the enforcement of this
Agreement or rights under this Agreement; or (vi) in confidence, in connection
with an actual or proposed merger, acquisition, or similar transaction.
14.4 Return of Confidential Information. Upon expiration or termination of this
Agreement, each party shall return all Confidential Information received from
the other party. Moreover, each party shall return Confidential Information upon
the written request from such other party.
15. TRADEMARKS
15.1 Trademarks. During the term of this Agreement, OEM shall have a
non-exclusive, non-transferable right to indicate to the public that its systems
and/or products contain AccelGraphics' Products and to designate such Products
under the trademarks, marks, and tradenames that AccelGraphics may adopt from
time to time ("Trademarks"). OEM shall not remove or alter any Trademark that is
applied to the Products upon receipt of Products from AccelGraphics. Except as
set forth in this Section 15. 1, OEM shall have no right, title or interest in
the Trademarks. At no time during or after the term of this Agreement shall OEM
challenge or assist others to challenge the Trademarks or the registration
thereof or attempt to register any trademarks, marks or trade names confusingly
similar to the Trademarks. All representations of the Trademarks that OEM
intends to use shall be exact copies of those used by AccelGraphics, or shall
first be submitted to the appropriate AccelGraphics personnel for approval of
design, color, and other details; and such approval shall not be unreasonably
withheld. If any of the Trademarks are to be used in conjunction with another
party's trademark on or in relation to Products, then the AccelGraphics
Trademarks shall be presented equally legibly, equally prominently, but
nevertheless separated from the other so that each appears to be a trademark in
its own right, distinct from the other mark.
15.2 Termination of Agreement. Upon termination of this Agreement for any
reason, OEM will immediately cease all use of Trademarks and, at OEM's election,
destroy or deliver to AccelGraphics all materials in control or possession which
bear such Trademarks.
16. INDEMNITY
16.1 By AccelGraphics. OEM agrees that AccelGraphics has the right to defend, or
at its option to settle, and AccelGraphics agrees, at its own expense, to defend
or at its option to settle, any claim, suit or proceeding brought against OEM or
its customer on the issue of infringement of any patent, copyright or trademark
by the Products sold hereunder or the use thereof, subject to the limitations
hereinafter set forth. AccelGraphics shall have sole control of any such action
or settlement negotiations, and AccelGraphics agrees to pay, subject to the
limitations hereinafter set forth, any final judgment entered against OEM or its
customer on such issue in any such suit or proceeding defended by AccelGraphics.
OEM agrees that AccelGraphics at its sole option shall be relieved of the
foregoing obligations unless OEM or its customer notifies AccelGraphics promptly
in writing of such claim, suit or proceeding and gives AccelGraphics authority
to proceed as contemplated herein, and, at AccelGraphics' expense, gives
AccelGraphics proper and full information and assistance to settle and/or defend
any such claim, suit or proceeding.
16.2 AccelGraphics Options. If the Products, or any part thereof, are, or in the
opinion of AccelGraphics may become, the subject of any claim, suit or
proceeding for infringement of any patent, copyright or trademark, or if it is
adjudicatively determined that the Products, or any part thereof, infringe any
patent, copyright or trademark, or if the sale or use of the Products, or any
part thereof, is, as a result, enjoined, then AccelGraphics may, at its option
<PAGE> 8
and expense either: (i) procure for OEM and its customers the right under such
patent, copyright or trademark to sell or use, as appropriate, the Products or
such part thereof; or (ii) replace the Products, or part thereof, with other
suitable Products or parts; or (iii) suitably modify the Products, or part
thereof, or (iv) if the use of the Products, or part thereof, is prevented by
injunction, remove the Products, or part thereof, and refund the aggregate
payments paid therefor by OEM, less a reasonable sum for use and damage.
AccelGraphics shall not be liable for any costs or expenses incurred without its
prior written authorization.
16.3 Limitation, Notwithstanding the provisions of Section 16.1 above,
AccelGraphics assumes no liability for (i) infringements covering completed
equipment or any assembly, circuit, combination, method or process in which any
of the Products may be used but not covering the Products when used alone; (ii)
trademark infringements involving any marking or branding not applied by
AccelGraphics or involving any marking or branding applied at the request of
OEM; or (iii) infringements involving the modification or servicing of the
Products, or any part thereof, unless such modification or servicing was done by
AccelGraphics.
16.4 Entire Liability. The foregoing provisions of this Section 16 state the
entire liability and obligations of AccelGraphics and the exclusive remedy of
OEM, its Distributors and their respective End Customers with respect to any
alleged infringement of patents, copyrights, trademarks or other intellectual
property rights by the Products or any part thereof.
16.5 By OEM. Except for infringement claims covered by AccelGraphics' indemnity
in Section 16. 1, OEM agrees to indemnify and hold AccelGraphics harmless
against any cost, loss, liability, or expense (including attorneys' fees)
arising out of third party claims against AccelGraphics as a result of OEM's (i)
representations of the Product which are inconsistent with AccelGraphics'
published Product descriptions and warranties, or (ii) other use or distribution
of the Product not authorized by this agreement.
17. LIMITATION OF LIABILITY
17.1 LIMITATION OF LIABILITY. EXCEPT AS PROVIDED IN SECTION 16, OEMS EXCLUSIVE
RIGHT TO RECOVER DAMAGES FOR ANY CAUSE WHATSOEVER WILL BE LIMITED TO THE TOTAL
AMOUNT PAID TO ACCELGRAPHICS FOR THE PRODUCT PURCHASED OR $200K, WHICH EVER IS
LESS, FOR THE PRODUCTS THAT ARE THE SUBJECT MATTER OF OEM'S CLAIM. IN NO EVENT
WILL ACCELGRAPHICS BE LIABLE FOR ANY COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES, LOSS OF USE, INTERRUPTION OF BUSINESS, LOST PROFITS OR ANY
CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES OF ANY KIND UNDER ANY
CAUSE OR ACTION (INCLUDING NEGLIGENCE), WHETHER OR NOT ACCELGRAPHICS HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
18. TERM AND TERMINATION
18.1 Term of Agreement. The Initial Term of this Agreement shall commence on the
Effective Date of this Agreement and remain in force for two (2) years from the
Effective Date and shall automatically renew for one (1) year increments
(Subsequent Terms) unless earlier terminated under the terms of this Agreement.
18.2 Default. If either party defaults in the performance of any of its material
obligations hereunder and if such default is not corrected within thirty (30)
days after written notice thereof by the other party, then the nondefaulting
party, at its option, may, in addition to any other remedies it may have,
terminate this Agreement by giving written notice of termination to the
defaulting party.
18.3 Insolvency. This Agreement may be terminated immediately by either party,
on written notice, (i) if the other party becomes insolvent, (ii) upon the
institution by the other party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of its debts, (iii) upon
the institution of such proceedings against the other party, which are not
dismissed or otherwise resolved in its favor within sixty (60) days thereafter,
(iv) upon the other party's making a general assignment for the benefit of
creditors, or (v) upon the other party's dissolution or ceasing to conduct
business in the normal course.
<PAGE> 9
18.4 Termination for Failure Renegotiate Pricing. If OEM fails to purchase up to
the forecasted product levels in Exhibit D and AccelGraphics and OEM are unable
to renegotiate pricing based on the actual quantity of products purchased as set
forth in Section 7 above, then AccelGraphics may terminate this Agreement upon
[***] written notice to OEM.
18.5 Fulfillment of Orders upon Termination. Upon termination of this Agreement
for other than OEM'S breach, AccelGraphics shall have the option, at its sole
discretion, to continue to fulfill all orders accepted by AccelGraphics prior to
the date of termination.
18.6 Effect of Termination.
(a) If this Agreement is terminated, AccelGraphics shall have the option,
at its sole discretion, to repurchase from OEM any or all Products shipped to
OEM which remain unsold Products in OEM'S inventory, at the net price paid by
OEM, less any prior credits granted by AccelGraphics.
(b) Notwithstanding any credit terms previously established with OEM,
upon notice of termination, all monies owed to AccelGraphics shall become due
and OEM shall remit to AccelGraphics such monies owed no later than ten (10)
days after receipt of notice of termination.
(c) If this Agreement is terminated or expires, then all of OEM'S rights
and licenses with respect to the Product shall terminate, provided that (i)
OEM'S right to continue to use one (1) copy of the Product and one (1) copy of
the related Documentation, in accordance with this Agreement, solely to support
and maintain existing OEM End Customers shall survive; and (H) each End Customer
license granted by OEM in accordance with this Agreement, in existence as of the
effective date of expiration or termination, shall survive in accordance with
its terms, subject to termination for default in accordance with its terms,
which shall include the right of AccelGraphics and OEM to terminate for default
with respect to the End Customer License. All other copies of the Product and
related Documentation in OEM'S and its Distributors' possession shall be
promptly destroyed or returned to AccelGraphics.
19. SURVIVAL
The provisions of Section 8.5 ("Return of Products After Rejection Period"),
Section 8.6 ("Payment Terms"), Section 8.8 ("Taxes"), Section 8.9 ("Security
Interest"), Section 12 ("Limited Warranties"), Section 13 ("Ownership of
Proprietary Rights"), Section 14 ("Confidentiality"), Section 15 ("Trademarks"),
Section 16 ("Indemnity"), Section 17 ("Limitation of Liability"), Section 18
("Term and Termination"), Section 19 ("Survival"), Section 20 ("Export Laws and
Regulations") and Section 21 ("General") shall survive the termination of this
Agreement for any reason. All other rights and obligations of the parties shall
cease upon termination of this Agreement.
20. EXPORT LAWS AND REGULATIONS
20.1 Import & Export Controls. OEM understands that AccelGraphics is subject to
regulation by agencies of the U.S. government, including the U.S. Department of
Commerce, which prohibit export or diversion of certain products and technology
to certain countries. Any and all obligations of AccelGraphics to provide
Products, as well as any technical assistance, will be subject in all respects
to such United States laws and regulations and will from time to time govern the
license and delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, International Trade
Administration, or Office of Export Licensing. OEM warrants that it will comply
in all respects with the export and reexport restrictions set forth in the
export license (if necessary) for every Product shipped to OEM. OEM will take
all actions which may be reasonably necessary to assure that no end-user
contravenes such United States laws or regulations.
<PAGE> 10
20.2 Export Prohibitions. Without in any way limiting the provisions of this
Agreement, OEM agrees that unless prior authorization is obtained form the
Office of Export Licensing, it will not export, reexport, or transship, directly
or indirectly, to country groups Q, S, W, Y, or Z (as defined in the Export
Administration Regulations), or Afghanistan or the People's Republic of China
(excluding Taiwan) any of the technical data disclosed to OEM or the direct
product of such technical data or otherwise contravene the Export Administration
Regulations or other United States laws and regulations in effect from time to
time.
20.3 English Language. This Agreement was negotiated and executed in English,
and the original English language version will be controlling.
20.4 Government Approvals. OEM represents and warrants that no consent or
approval of any governmental authority is required in connection with the valid
execution and performance of this Agreement.
20.5 Currency Control. OEM represents and warrants that no currency control laws
prevent the payment to AccelGraphics of any sums due under this Agreement.
21. GENERAL
21.1 U.S. Government Restricted Rights. OEM shall ensure that any Software
distributed, directly or indirectly, by OEM to the United States Government
shall be distributed pursuant to an agreement that contains the following
language:
"This Product is provided with RESTRICTED RIGHTS. Use, duplication, or
disclosure by the government is subject to the restrictions set forth
in subdivision (c)(1)(ii) of the Rights in Technical Data and Computer
Software clause at 48 CFR 252.227-7013, or in the Commercial Computer
Software Restricted Rights clause at 48 CFR 52.227-19, as applicable.
The contractor is [Insert Name and Address of OEM]. The manufacturer is
AccelGraphics, Inc., 1942 Zanker Road, San Jose, CA 95112.
21.2 Assignment. OEM shall not assign this Agreement in whole or in part,
without AccelGraphics' prior written approval. AccelGraphics may assign this
Agreement in whole or in part. AccelGraphics may also sell, pledge or otherwise
transfer its right to receive payments under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
21.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, without reference to
conflict of laws principles.
21.4 Forum Selection. All disputes arising out of this Agreement shall be
subject to the exclusive jurisdiction of the state and federal courts within
Santa Clara County, California, and the parties agree and submit to the personal
and exclusive jurisdiction and venue of these courts.
21.5 Partial Invalidity. If any provision in this Agreement shall be found or be
held to be invalid or unenforceable in any jurisdiction in which this Agreement
is being performed, then the meaning of said provision shall be construed, to
the extent feasible, so as to render the provision enforceable, and if no
feasible interpretation would save such provision, it shall be severed from the
remainder of this Agreement, which shall remain in full force and effect. In
such event, the parties shall negotiate, in good faith, a substitute, valid and
enforceable provision which most nearly effects the parties' intent in entering
into this Agreement.
21.6 Independent Contractors. The parties hereto are independent contractors.
Nothing contained herein or done in pursuance of this Agreement shall constitute
either party the agent of the other party for any purpose or in any sense
whatsoever, or constitute the parties as partners or joint ventures. OEM shall
not create or assume any obligation on AccelGraphics' behalf for any purpose
whatsoever, unless AccelGraphics expressly agrees to such an obligation in
writing.
<PAGE> 11
21.7 Modification. No alteration, amendment, waiver, cancellation or any other
change in any term or condition of this Agreement shall be valid or binding on
either party unless the same shall have been mutually assented to in writing by
both parties.
21.8 Waiver. The failure of either party to enforce at any time any of the
provisions of this Agreement, or the failure to require at any time performance
by the other party of any of the provisions of this Agreement, shall in no way
be construed to be a present or future waiver of such provisions, nor in any way
affect the right of either party to enforce each and every such provision
thereafter. The express waiver by either party of any provision, condition or
requirement of this Agreement shall not constitute a waiver of any future
obligation to comply with such provision, condition or requirement.
21.9 Notices. Any notice required or permitted to be given by either party under
this Agreement shall be in writing and shall be personally delivered or sent by
certified or registered letter, or by facsimile confirmed by registered or
certified letter, to the other party at the following address, or such new
address as may from time to time be supplied hereunder by the parties hereto.
Notices will be deemed effective three (3) working days after deposit, postage
prepaid, in the mail.
<TABLE>
<CAPTION>
ACCELGRAPHICS DIGITAL EQUIPMENT CORPORATION
<S> <C>
AccelGraphics, Inc. ____________________________________
1942 Zanker Road ____________________________________
San Jose, California 95112 ____________________________________
Telephone: 408-441-1556 Telephone:__________________________
Facsimile: 408-467-5097 Facsimile:__________________________
Attention: President Attention:__________________________
</TABLE>
21.10 Force Majuere. Notwithstanding anything else in this Agreement, and except
for the obligation to pay money, no default, delay or failure to perform on the
part of either party shall be considered a breach of this Agreement if such
default, delay or failure to perform is shown to be due to causes beyond the
reasonable control of the party charged with a default, including, but not
limited to, causes such as strikes, lockouts or other labor disputes, riots,
civil disturbances, actions or inactions of governmental authorities or
suppliers, epidemics, war, embargoes, severe weather, fire, earthquakes, acts of
God, nuclear disasters, or default of a common carrier; provided, that for the
duration of such force majeure the party charged with such default must continue
to use all reasonable efforts to overcome such force majeure.
21.11 Legal Fees. In any litigation or arbitration relating to this Agreement,
including litigation or arbitration with respect to any addendum, instrument,
document or agreement made under or in connection with this Agreement, the
prevailing party shall be entitled to recover its costs and reasonable
attorneys' fees.
21.12 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.
21.13 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter of this Agreement.
This Agreement merges and supersedes all prior or contemporaneous agreements,
discussions and understandings between the parties, oral or written, concerning
the subject matter of this Agreement.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by duly authorized officers or representatives as of the date first above
written.
ACCELGRAPHICS, INC. Digital Equipment Corporation
By: /s/ Nancy E. Bush By: /s/ Eddie C. Maxie
___________________________________ ____________________________
Print Name: Nancy E. Bush Print Name: Eddie C. Maxie
___________________________ ____________________
Title: CFO Title: VP Acquisition
________________________________ _________________________
Date: 2/21/96 Date: 2/5/96
________________________________ _________________________
<PAGE> 13
EXHIBIT A
PRODUCTS AND PRICING
[* * *] [* * *] [* * *]
<PAGE> 14
EXHIBIT B
END CUSTOMER LICENSE
READ THE TERMS AND CONDITIONS OF THIS LICENSE CAREFULLY BEFORE USING THIS
SOFTWARE. BY USING THIS SOFTWARE, YOU AGREE TO BE BOUND BY THE TERMS OF THIS
AGREEMENT, WHICH INCLUDE THE SOFTWARE LICENSE AND THE LIMITED WARRANTY
(COLLECTIVELY, THE "AGREEMENT"). IF YOU DO NOT ACCEPT OR AGREE TO BE BOUND BY
THE TERMS OF THIS AGREEMENT, PROMPTLY RETURN THE SOFTWARE UNUSED WITHIN FIFTEEN
(15) DAYS OF PURCHASE FOR A REFUND.
SOFTWARE LICENSE AGREEMENT
1. License to Use. AccelGraphics, Inc. ("AGI") grants you ("CUSTOMER") a
non-exclusive and non-transferable license ("LICENSE") to use the enclosed AGI
graphics software library and accompanying documentation ("SOFTWARE") to develop
and compile software applications that use the Software ("APPLICATIONS"). This
License does not grant the right to distribute any form of the Software with or
without Applications.
2. Restrictions. The Software is copyrighted and title to all copies is retained
by AGI. This program is licensed to you for use under the terms of this
Agreement. This license is not a sale. Title and copyrights to the software and
any copy of the software made by you remain with AGI. Unauthorized copying of
the Software, or failure to comply with the restrictions below, will result in
automatic termination of the license and will make available to AGI other legal
remedies.
YOU MAY:
- Make one (1) copy of the Software in machine readable form
solely for backup purposes, provided that you reproduce all
copyright and proprietary notices on the copy.
YOU MAY NOT:
- Make copies of the documentation or program disks except for
the one (1) backup copy.
- Distribute Software of Applications which incorporates the
Software in any manner.
- Loan, rent, sell, sub-license or otherwise transfer the
software and/or documentation.
- Modify, translate, reverse engineer, decompile, disassemble,
create derivative works based on or copy (except for the
backup copy) the Software.
- Remove any proprietary notices, labels or marks on the
Software of AGI or its licensors.
- Export or reexports whether directly or indirectly, the
Software, or any direct or derivative products thereof,
outside the United States without first obtaining the
appropriate government export licenses and approvals, and
obtaining an export license from AGI.
3. Limited Warranty. AGI warrants that the media on which the Software is
furnished will be free of defects in materials and workmanship under normal use
for a period of thirty six (36) months from the date of purchase, as evidenced
by a copy of your receipt. Otherwise, the Software is provided "AS IS," without
a warranty of any kind. This warranty extends only to Customer as the original
licensee. AGI's entire liability and Customer's exclusive remedy under this
warranty will be the correction of defects in media or replacement of the media,
or if correction or replacement is not reasonably achievable by AGI, the refund
to Customer of the license fee, upon return of the software.
<PAGE> 15
4. Disclaimer of Warranty. EXCEPT AS SPECIFIED IN THIS LICENSE AGREEMENT, ALL
EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT, ARE HEREBY EXCLUDED. AGI DOES NOT WARRANT THAT THE OPERATION
OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE.
5. Limitation of Liability. IN NO EVENT WILL AGI BE LIABLE FOR ANY LOST REVENUE,
PROFIT OR DATA, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE
DAMAGES HOWEVER CAUSED AND REGARDLESS OF THEORY OF LIABILITY ARISING OUT OF THE
USE OF OR INABILITY TO USE THE SOFTWARE, EVEN IF AGI HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
6. Confidentiality. The Software is confidential and proprietary information of
AGI and/or its licensors. Customer agrees to take adequate steps to protect the
Software from unauthorized disclosure, copying or use.
7. Termination. This License is effective until terminated. Customer may
terminate this License by destroying all copies of the Software including
accompanying documentation. This license will terminate immediately without
notice from AGI if Customer fails to comply with any provision of this License.
Upon termination, Customer must destroy all copies of Software.
8. US. Government Restricted Rights. If Customer is acquiring the Software on
behalf of the U.S. Government, the following provisions apply. If the Software
is supplied to the Department of Defense ("DOD"), the Software is subject to
"Restricted Rights" as that term is defined in the DOD Supplement to the Federal
Acquisition Regulations in paragraph 252.227-7013(c). If the Software is
supplied to any unit or agency of the United States Government other than DOD,
the governments rights in the Software will be defined in paragraph
52.22719(c)(2) of the Federal Acquisition Regulations. Use, duplication,
reproduction or disclosure by the Government is subject to such restriction.
Contractor/Manufacturer is: AccelGraphics, Inc., 1942 Zanker Road, San Jose, CA
95112.
9. Governing Law. This License is made under and will be governed by the laws of
the State of California, USA, excluding its choice of law provisions.
10. Integration. This Agreement between Customer and AGI is the entire agreement
between Customer and AGI relating in any way to the Software. This Agreement
supersedes any proposal or prior agreement oral or written and any other
communication relating to the subject matter of this Agreement. No variation of
the terms of this Agreement or different terms will be enforceable against AGI
unless AGI gives its express consent, including an express waiver of the terms
of this Agreement, signed in writing by an officer of AGI.
11. Support. You must complete and return the Software Registration to be
eligible for customer support and service.
IF YOU HAVE ANY QUESTIONS REGARDING THIS LICENSE, PLEASE CONTACT US IN WRITING
AT:
ACCELGRAPHICS, INC.
1942 ZANKER ROAD
SAN JOSE, CALIFORNIA 95112
ATTENTION: CUSTOMER SUPPORT
<PAGE> 16
EXHIBIT C
AG300 PURCHASING SPECIFICATION
(SEE ATTACHED)
<PAGE> 17
To: ST_JOHNSON
CC:
Subj: AccelGraphics AG300 Purchase Specification, Rev: 17Dec95
================================================================================
17-DEC-1995
AccelGraphics AG300 PCT-Bus
Graphics Adapter Card
(30-46897-01: Purchase Spec)
- --------------------------------------------------------------------------------
TlTLE: AccelGraphics AG300 PCI-Bus Graphics Adapter Card
Proprietary Information
This document defines the requirements that the Vendor shall meet to supply
products to Digital Equipment Corporation. Portions of this document contain
Digital Equipment Corporation proprietary information. This information may only
be used in the design, production or manufacture of the product to be supplied
to Digital Equipment Corporation, and is governed solely by the provisions of
the Basic order Agreement between Vendor and Digital Equipment Corporation.
Not withstanding any less restrictive or conflicting legends appearing on
Digital standards, Drawings, or Purchase Specifications to the contrary, the use
of the information contained in this document is governed solely by the
provisions of the Basic Order Agreement. This is an unpublished work protected
by Federal Copyright Law. Any unauthorized reproduction is strictly prohibited.
All rights reserved.
Default Tolerances
Unless otherwise specified, dimensions are in inches. Fractional inch tolerance
is +/- 1/64. Decimal inch tolerances are as follows:
one place 0.1
two places 0.02
three places 0.005
Angle tolerance is +/- 0 deg. 30 min.
Approved Vendor
Approved vendors are designated in Digital's Qualified Vendor Listing.
Document Approvals and Date
<TABLE>
<CAPTION>
Product Manager Resp. Purchasing Release
Engineer Manager Data
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Kevin Gray Thomas Zajac Steve Johnson
Digital Purchase Specification page 1 of 11
PS-30-46897-01
</TABLE>
<PAGE> 18
Document Revision History
<TABLE>
<CAPTION>
Doc XCO No. Data Change Description
Revision
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0.1 - 29-Nov-95 Prelim
0.2 - 6-Dec-95 Changes per vendor's rev 0.1 review
0.3 - 13-Dec-95 Added European & Japanese regulatory requirements
0.4 - 17-Dec-95 Further detailed spec's
- --------------------------------------------------------------------------------
</TABLE>
IBM, PC/XT/AT and PS/2 are registered trademarks of International Business
Machines Corporation
SCO and SCO XENIX are trademarks of the Santa Cruz Operation, Inc.
UNIX is a registered trademark of AT&T Bell Laboratories
The following are trademarks of Digital Equipment Corporation:
DEC
DECpc
Digital
DECstation
VMS
PCSA
<PAGE> 19
1.0 General Description
Digital shall purchase from AccelGraphics, Inc. the Accel AG300 PCI-Bus Graphics
Accellerator Adapter Card for use with Digital line of personal computers.
The AC300 adapter shall provide the interface between the PCI-bus and 15 pin
analog video output and include the following features:
- - High performance accelerated hardware based graphics operations for fast 2D
and 3D Windows-NT graphics and imaging operations
- - High speed 5MB VRAM memory supporting 32 planes, 24-bit true color, 16-bit
double-buffered color and 8-bit color.
- - 2.5 MB DRAM providing 16-bit Z-buffer capability
- - Hardware acceleration and 3D rendering including color interpolation on the
spans, clip testing, alpha testing and Z-testing.
- - Driver support for the following operating systems: Windows NT 3.51 (or
latter rev) including support for standard Windows v3.1 and Windows for
Work Groups v3.11 applications.
- - Supports OpenGL 3D graphics API on Windows NT ver. 3.51 (or latter rev)
- - The following applications will be supported and appropriately certified
for operation with the AG300 on the specified Digital PC's in which the
AG300 will be offered:
a) Microsoft Windows-NT 3.51 OpenGL
b) Microsoft Windows-NT HCT (hardware compatibility test)
c) Pro/Engineer and Pro/Jr. from Parametric Technology Corporation
d) AVS/Express from Visual Systems Inc.
e) Inventor's Studio
f) SDRC I DEAS
g) SoftImage
- - Resolutions supported: 1024x768, 1280x1024
- - Color depths supported: 256, 65K, 16.7M (true-color)
- - Single option connecto-slot PCI-bus card compliant to PCT-bus.
Specification Ver 2.1
- - Flicker free non-interlaced and interlaced monitor support for standard
PC color multisync monitors with VFSA monitor rates/timing per chart below:
<TABLE>
<S> <C>
1024x768: 60, 70, 72 Hz
1280x1024: 60, 70 and 74Hz
</TABLE>
- - Graphics Performance:
<TABLE>
<S> <C>
2D vectors: 750K/sec (10-pixel, 24-bit)
3D vectors: 750K/sec (10x1 pixels, Gauraud shaded, unlit, Z-buffered)
3D triangles: 250K/sec (50 pixels, Gauraud shaded, lit, Z-buffered)
Frame buffer-to-frame buffer copy:
30 Mpixels/sec (8/16-bit images)
15 Mpixels/sec (32-bit images)
</TABLE>
- - Dual screen capability with an additional AG300 card installed. Doubles the
resolution, to 2560x1024 (1280x1024 setting) and 2048x768 (1024x768
setting). Provides twice the Windows-NT screen size allowing complete
Windows operation movement from screen to screen including all cursor
movements and full support for all AG-300 3D features.
- - VGA signal pass-thru capability via external pass-thru cable to add VGA
functional capability by routine at separately provided VGA graphics card's
VGA signal into the ACCEL AG300 VGA-In connector.
- - Minimum system operational requirement:
<PAGE> 20
CPU: Intel Pentium, Pentium-Pro or 486
RAM: Windows/NT with OpenGL only: 16MB
CAD applications under Windows/NT: 32MB
Hard Disk: 200MB or greater
Monitor: Standard PC color multisync monitors with VESA-
standard monitor rates/timing for non-interlaced and
interlaced operation
- - US, Canadian, European and Japanese Regulatory Approvals including European
CE-Mark.
- - 3-yr. warranty
2.0 Video Board Kit Contents
Each Accel AG300 PCI Video Board kit shall consist of the following items:
<TABLE>
<CAPTION>
ITEM: PART #: PROVIDER:
<S> <C> <C>
ACCELGRAPHICS AG300 VIDEO BOARD KIT 30-46897-01 ACCEL
--- ACCEL AG300 PCI VIDEO CARD ACCEL
--- WINDOWS NT 3.51 INTEL-CPU DRIVERS DISKETTE 3.5" ACCEL
--- USERS/INSTALLATION MANUAL ACCEL
--- 1 FOOT VGA PASS-THRU CABLE ACCEL
--- PACKAGING BOX ACCEL
--- (1) BAR CODE LABEL STOCK ACCEL
</TABLE>
3.0 Software Drivers
As updates to drivers become available from Accel, Accel will provide a single
copy of those updates to Digital at no cost to Digital. These updates will be
provided via bulletin board or floppy disk media. Accel will allow Digital to
place those updates on a bulletin board at Digital for the benefit of customers
who have purchased an Accel Video Board with older drivers. The Digital BBS is
located and accessible at multiple geographic locations (US, Europe, Far East).
4.0 Physical Specifications:
Card: Length: 8.0" Width: 4.20" Height: 0.7"
Standard PCI Spec Ver 2.1 compliant form factor
Weight: Not more than 6 ounces.
4.1 Architecture Interface:
Standard PC PCI-Bus Ver 2.1 electrical and physical interface
Standard 15-pin D-type video output Connector (on bracket) to monitor
Standard 15-pin D-type connector (on bracket) for VGA PassThru-In
<PAGE> 21
4.1.1 Standard 15-pin D-Type Video Output Connector to Monitor:
(5) (4) (3) (2) (1)
(10) (9) (8) (7) (6)
(15) (14) (13) (12) (11)
Pin No. Signal Description
1 Red (per section 4.1.3 and 4.1.4)
2 Green (per section 4.1.3 and 4.1.4)
3 Blue (per section 4.1.3 and 4.1.4)
4 Free
5 Ground (analog)
6 Ground (red)
7 Ground (green)
8 Ground (blue)
9 Free
10 Ground (sync.)
11 Free
12 Free
13 HSync (per section 4.1.3 and 4.1.4)
14 VSync (per section 4.1.3 and 4.1.4)
15 Free
4.1.2 15-pin D-Type Connector for VGA-PassThru Input from VGA Card:
(5) (4) (3) (2) (1)
(10) (9) (8) (7) (6)
(15) (14) (13) (12) (11)
Pin No. Signal Description
1 Red (per section 4.1.3 and 4.1.4)
2 Green (per section 4.1.3 and 4.1.4)
3 Blue (per section 4.1.3 and 4.1.4)
4 Free
5 Ground (analog)
6 Ground (red)
7 Ground (green)
8 Ground (blue)
9 Free
10 Ground (sync.)
11 Free
12 Free
13 HSync (per section 4.1.3 And 4.1.4)
14 VSync (per section 4.1.3 and 4.1.4)
15 Free
4.1.3 15-pin D-Type Connector Signal Electrical Spec's:
<TABLE>
<S> <C>
R,G,B Video output signals:
Signal level --- 0.714V +/-7%
DC level --- less than or equal to +/- 1.0 volt
Output impedance --- 75 Ohms +/2%
R,G,B output level variation --- less than or equal to +/-5%
Tr/Tf --- 4 ns less than Tr/Tf less than 9 ns (test with a RC loading, 2K ohms / 200p F)
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
H/V Sync signals:
TTL level output --- Vol greater than or equal to 2.1V @ Iol - 0.5 mA
Vol less than or equal to 0.7V @ Iol :- 3.0 mA
Tr/Tf --- 10 ns less than Tr/Tf less than 300 its ( test with a RC loading, 2K ohms / 200p F)
H/V sync signals sequencing:
1s less than From power switch on to H/V sync present less than 20s
Os less than Activated from Suspend state to H/V sync present less than 1s
DDC1/DDC2B signals: Not supported.
</TABLE>
4.1.4 15-pin D-Type Connector Signal Timing Spec's:
Per VESA Computer Display Monitor Timing Specification Ver. 1.0, Rev. 0.3, Dtd
2/16/95 (Video Electronics Standard Association, 2150 Nort First Street, Suite
440, San Jose, CA 95131-2020) for the following settings:
1024x768: 60, 70, 72 Hz
1280x1024: 60, 70 and 74Hz
5.0 Warranty
Vendor will provide a three(3) year warranty on the AG300 Video Board. This
three year warranty will cover normal component failure occurances.
6.0 Approvals
The vendor shall provide product with the following approvals to Digital:
<TABLE>
<S> <C>
FCC CFR Title 47, Federal Communications Commission Rules
Part 15 and Regulations, Part 15, Class B Digital Device/Personal
Computer. (The AccelGraphics Inc. AG300 video board is required
to meet FCC Class-B certification on
the specific Digital PC's in which
is will be offered:
a) Project name Delta PC platform
b) Celebris-XL PC
UL 1950 Underwriter's Laboratories, Inc. information
(1st Edition) Technology Equipment Including Electrical Business Equipment
CISPR-22 Class-B EN55022
EN60950 Safety of Information Technology Equipment (TUV)
VCCI Type 2 ITE Japanese RPl Emission Regulatory Specification
</TABLE>
7.0 Product Marking
The product boxes shall be marked with a Digital part number, revision level,
manufacturing site code, quantity.
Product bar code labels shall be as described in DEC STD-047 to assure
traceability through the Digital warehousing and distribution systems.
Each box shall have two machine readable bar code labels, one on each side with
the following minimum information printed in bar code, with human readable
characters and Data Identifiers. The data shall be printed in
<PAGE> 23
this sequence: (1) Digital part number, (2) Quantity, (3) UPC#, (4) "Made in" or
"Assembled in" statement in English and French.
<TABLE>
<S> <C> <C>
LABEL FORMAT:
(stacked)
------------------------------------------------
(P) PROD ID:
30-46897-01 less than --- Human readable
IIIIIIIIIIII less than ---Symbology code 39
------------------------------------------------
(Q) QTY.:
2 less than ---Human readable
III less than ---Symbology code 39
------------------------------------------------
UPC:
IIIIIIIIII less than ---Retail serial no, -
Human readable--- greater than ????????????? Symbology code I 2/5,
------------------------------------------------ UPC-A barcode symbol
UPC-A barcode symbol.
assemble in the U.S.A/ less than ---Human readable
assemble' aux Etats Unis
------------------------------------------------
</TABLE>
LABEL PLACEMENT: For the Product ID package, only one bar code label is required
per unit pack. This shall be on the lower right hand corner.
F.A.C.T DATA IDENTIFIERS: Each bar code data field shall have the appropriate
Data identifier encoded within bar code symbol according to ANSI/MH10.9 FACT
standard. Examples would be (Q) for Quantity, (P) for product number, etc.
COUNTRY OF ORIGIN: Each product package label shall be marked in English and
French with, the Country of Origin (COO) for made in or assemble in. This will,
be printed at the bottom of the label in human readable text only.
UPC RETAIL LABEL: Shall have retail UPC label with UPC Item Number printed in
bar code symbology UPC-A.
8.0 Packaging and Shipping
Boxed video board kit containing video board, diskettes, cable and manuals shall
be packed in a damage resistant box. Digital will receive all units in
single-unit boxes.
The boxed product shall be consolidated boxed and shipped to the appropriate
warehousing and distribution facility specified by Digital, ready to be
installed in designated systems or kitted for customer runs without inspection
or other action by Digital. Each unit shall be sufficiently packaged for
protection against damage during shipping, handling, and storage.
9.0 Power Requirements:
The voltages required to operate this electronics board are
+5.0 Volts DC +5% at 3. 2 Amps maximum
+12 Volts DC +/- 8% at 0 Amps maximum
- -12 Volts DC +/- 8% at 0 Amps maximum
<PAGE> 24
measured at the interface side of the bus connector to its associated return
ground.
Maximum power supply ripple allowed:
+5V Supply: 100 mV peak-to-peak, 0 - 20MHz
+12V Supply: 200 mV peak-to-peak, 0 - 20MHz
- -12V Supply: 200 mV peak-to-peak, 0 - 20MHz
10.0 Environmental Requirements
10.1 Operating Environment:
For operating conditions listed below, the product must be capable of all
specified functional capabilities without any degradations over the full
operational range. Under these operating conditions, the product shall not
suffer any damage (or pc system it is installed in) nor adversely affect
subsequent product operation.
Operating:
Temperature: 50 deg F to 122 deg F
Humidity: 10% - 90% non-condensing
Altitude: 0 to 6562 ft (2.0 km) above mean sea level
Mechanical Shock: The product (installed in the DEC PC system)
will operate while a half-size shock pulse of
10G (+/- 1G) and 10mSec (+/- 3mSec) duration
is applied once in either direction of three
orthogonal axes.
Mechanical Vibration: The product (installed in DEC PC system) will
operate while subjected to the following
vibration conditions applied in either
direction of the three orthogonal axes:
Frequency: Acceleration:
5-10Hz 0.020 in. DA
10-500-10Hz 0.1 G peak (1.0 m/S-squared)
30-5Hz 0.020 in. DA
10.2 Non-Operating Environment:
The following conditions will not cause damage to the product (or pc system it
is installed in) nor adversely affect subsequent product operation.
Temperature: -20 deg C to +50 deg C
Humidity: 5% - 95% non-condensing
Altitude: 0 to 12,000 ft (3.6 km) above mean sea level
Mechanical Shock:
Customer handling: Not adversely affected by normal handling
and usage.
Shipping packaging: Meets ASTM D-775 Standard Method of Drop
Test for Shipping Containers
<PAGE> 25
11.0 Factory configured Jumper Selections
The Accel Graphics AG300 Graphics Card may incorporate staking pins and Jumper
plugs to control various system parameters. These jumper selections shall be
configured in standard vendor factory default setting as follows:
Jumper Setting Function
- --------------------------------------------------------------------------------
None
12.0 Quality Assurance Provisions
Workmanship: The product shall be supplied uniform in quality, and free from
defects that adversely affect life, serviceability, performance, or appearance.
13.0 Approval
Products submitted shall have been initially approved by Digital. Approval shall
be given only after samples representative of the supplier's normal production
process have been examined, tested, and found to meet the requirements of this
specification. After approval, no changes affecting appearance, form, fit, or
function shall be made without written approval from Digital, and incorporation
of such labeling and/or documentation changes as Digital considers necessary to
reflect the changes.
14.0 Reliability
The AG300 will meet the following:
Mean-time-between-failures (MTBF) Greater than 100K Hour (100% duty-cycle)
Preventative Maintenance None
Vendor shall provide Digital with field failure data for purposes of field
service spare planning.
15.0 Technical Data Package
Vendor shall provide Digital with a technical data package that includes the
suppliers product specifications. Vendor shall provide all technical data needed
by Digital to identify hardware equipment and software, conduct configuration
control, inspection, and conduct system and environmental testing. Vendor shall
provide copies of their final test software to Digital for system verification.
For specific requirements, refer to the Quality Addendum to the Basin Order
Agreement.
16.0 Connectors
<TABLE>
<S> <C>
Monitor Connector: IBM-PC VGA standard 15-pin D-type connector (female, on bracket)
VGA Pass-Thru Connector: IBM-PC VGA standard 15-pin D-type connector (an bracket)
PCI-bus Connector: Compliant to PCI Ver 2.1 specification
</TABLE>
17.0 Reference Documents and Drawings
Digital Standard 119 Digital Product Safety
Digital Standard 043 Packaging Requirements for Vendor Supplied
Products, Parts and Assemblies.
Digital Standard 047 Bar Code Specification
<PAGE> 26
<TABLE>
<S> <C>
Federal Communications FCC Part 15, Docket 20780, Subpart J for class B equipment in an enclosure.
Commission
Underwriter's Laboratories Safety of Information Technology Equipment with sub clauses 1-7
Inc. UL-STD-1950 Applicable Appendix and Supplement B.
Canadian Standards Association No. 950 Safety of Information Technology Equipment including Electrical
CSA-STD-C22.2 Business Equipment
No. 950 -M1989
ISO 9000 (For ref only) Quality Management and Quality Assurance
</TABLE>
<PAGE> 27
EXHIBIT D
OEM PRICING FORECAST
Purchases for Initial Term, starting January 1996, forecasted amounts:
[* *_______________________*]
[* *_______________________*]
[* *_______________________*]
[* *_______________________*]
Total Number of Units: [* * *]
<PAGE> 28
EXHIBIT E
PRODUCT WARRANTY
A. WARRANTED AND UNWARRANTED PRODUCTS; EXCLUSIONS
AccelGraphics' Standard Graphics Accelerator Board Warranty and Standard
Software Warranty and OEM's sole and exclusive remedies for such warranties are
specified below. ACCELGRAPHICS' WARRANTIES STATED IN THIS SECTION ARE IN LIEU OF
ALL OTHER WARRANTIES EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
No statement, including without limitation, representations regarding capacity,
suitability for use or performance of Product(s), whether made by AccelGraphics
employees or otherwise, shall be deemed to be a warranty by AccelGraphics for
any purpose or give rise to any liability of AccelGraphics unless expressly
contained in this Warranty.
The warranties in this section do not apply to any Product(s) which has been (i)
altered, except by AccelGraphics or by another party adhering to AccelGraphics'
instructions, or (ii) used in conjunction with another vendor's product
resulting in a defect, or (iii) damaged by improper electrical power or
environment, abuse, misuse, accident or negligence.
B. LIMITED GRAPHICS ACCELERATOR BOARD WARRANTY
AccelGraphics warrants to OEM that the Graphics Accelerator Board covered by the
Standard Graphics Accelerator Board Warranty will be free from defects in
workmanship and materials for a period of thirty six (36) months commencing
three (3) months after OEM's receipt of the Graphics Accelerator Board.
OEM's exclusive remedy, and AccelGraphics' sole obligation for any Graphics
Accelerator Board failing to meet this standard Graphics Accelerator Board
warranty shall be as follows:
In the event of a defect in workmanship or materials, AccelGraphics shall
attempt, at its option, either to repair or replace the defective Graphics
Accelerator Board or component and return it to OEM within ten (10) working days
from receipt at AccelGraphics' designated factory or depot for reinstallation by
OEM. All replaced Graphics Accelerator Board or components shall become
AccelGraphics' property. AccelGraphics may, at its option, repair a defective
Graphics Accelerator Board component or replace the defective Graphics
Accelerator Board component or Graphics Accelerator Board with tested,
operational new Graphics Accelerator Board component or Graphics Accelerator
Board. Such Graphics Accelerator Board or Graphics Accelerator Board component
to be replaced by AccelGraphics will be replaced with Graphics Accelerator
Board/Graphics Accelerator Board components at the then current revision level
of the applicable Graphics Accelerator Board/components. All in-warranty repairs
or replacements will be warranted for a period of time equal to either the
residual warranty period remaining under the thirty six (36) month warranty or
the standard repair warranty of six (6) months, whichever is longer.
C. LIMITED SOFTWARE WARRANTY
AccelGraphics warrants to OEM that Software covered by the Standard Software
Warranty, as delivered by AccelGraphics and properly installed and operated on a
designated system, will substantially conform to its specifications as stated in
the Documentation provided with the Software for a period of thirty six (36)
months commencing three (3) months after OEM's receipt of the Software.
AccelGraphics does not warrant that any item of Software is error-free or that
its use will be uninterrupted. If any item of Software fails to conform to its
specifications as stated in the Documentation during this warranty period, OEM
shall promptly notify AccelGraphics of, and adequately describe, the failure.
OEM's exclusive remedy and AccelGraphics' sole obligation shall be that
AccelGraphics will use reasonable efforts to correct any such failure which is
reported to AccelGraphics within the warranty period.
<PAGE> 29
AccelGraphics shall not be obligated to remedy any Software defect which cannot
be adequately repeated at either AccelGraphics' or OEM's facility.
D. GENERAL
OEM shall not make any representations or warranties to any End Customer or
third party beyond the representations and warranties found in this Agreement
and AccelGraphics' written Product(s) documentation. OEM shall have complete
responsibility and liability for the performance of its agreements with its End
Customers. OEM shall indemnify and hold AccelGraphics harmless from and against
any liability or expense arising out of any (a) representations or warranties
made by OEM or its agents to any End Customer or third party or (b) acts or
omissions of OEM under this Agreement or any other agreement or arrangement
between the parties.
<PAGE> 30
EXHIBIT F
OEM WARRANTY PROCEDURE
1. WARRANTY PROCEDURE
1.1 Replace from Inventory. If there is an apparent failure of any
AccelGraphics' Product during the warranty period for such product, OEM agrees
to replace the faulty unit from its inventory and return the allegedly defective
Product to AccelGraphics.
1.2 Return Authorization. Before returning such Product, OEM must first
contact AccelGraphics and obtain a Returned Material Authorization (RMA) number.
The following information will be required to secure the RMA number for advanced
warranty returns:
1. Name of customer
2. Serial number and shipment date of original Product
3. Serial number and shipment date of replacement Product
4. Offsetting no-charge purchase order to replenish inventory.
1.3 Return Procedure. Upon receipt of the RMA number, OEM will return the
Product to AccelGraphics. The RMA number and unit serial number must be
referenced on any and all correspondence regarding the unit, and must also be
visible on the outside of the shipping container and referenced on all shipping
documents. Product returned without prior approval of AccelGraphics will not be
accepted. Product returned freight collect or C.O.D. will not be accepted.
1.4 No Fault Found. Any Product returned to AccelGraphics for repair under
warranty for which there is NO FAULT FOUND will be returned freight collect, and
a charge of $100 will be invoiced to OEM's account.
1.6 Packaging and Damage. All Products returned under warranty must be
adequately packed in a AccelGraphics' shipping container or a container
designated by AccelGraphics as acceptable. Damage incurred from improper or
inadequate packaging will void all warranties.
<PAGE> 31
EXHIBIT G
OEM TAX EXEMPT CERTIFICATE
RESELLER CERTIFICATION
FIRM NAME:
------------------------------------------------------------
I HEREBY CERTIFY:
that I hold valid sellers permit No.
In the state of
------------------------------------------------------------
issued pursuant to the Sales and Use Tax Law, that I am engaged in the business
of
selling
------------------------------------------------------------------
that the tangible personal property described herein which I shall purchase FROM
ACCELGRAPHICS, INC. will be resold by me in the form of tangible personal
property, PROVIDED, however that in the event any of such property is used for
any purpose other than retention, demonstration, or display while holding it for
sale in the regular course of business, it is understood that I am required by
the Sales and Use Tax law to report and pay the tax, measured by the purchase
price of such property.
Description of property to be purchased: GRAPHICS CARDS
Dated: 2/5/96 Signature: /s/ Eddie C. Maxie
------------------- ------------------------------
At: Name: Eddie C. Maxie
--------------------- -----------------------------------
Title: VP Acquisition
----------------------------------
Phone: Address:
------------------- --------------------------------
<PAGE> 32
AccelGraphics
January 30, 1996
Mr. Stephen Johnson
Digital Equipment Corp.
100 Nagog Park, AKO 1-2/A 1 3
Acton, MA 01720
Dear Steve:
Enclosed please find two copies of the OEM Agreement for your review and
signature on page 12. Also, please note tags for the following:
Exhibit C - please initial changes to 1 ft. of cable
Exhibit D - please complete one year forecast
Exhibit E - please complete the Reseller Certification
After completion, please send both copies back to me for signatures and I will
send a fully executed copy back to you as soon as possible.
Best regards,
/s/ Nancy E. Bush
Nancy E. Bush
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.10
PRODUCT PURCHASE AGREEMENT
BETWEEN
HEWLETT-PACKARD FRANCE
AND
ACCELGRAPHICS, INC.
DATED AS OF JULY 1, 1996
<PAGE> 2
PRODUCT PURCHASE AGREEMENT
SELLER: ACCELGRAPHICS, INC.
1942 Zanker Road
San Jose, CA 95112
U.S.A.
HP: HEWLETT-PACKARD FRANCE
Performance Desktop Computing Operation
5, avenue Raymond Chanas - Eybens,
38053 Grenoble, Cedex 9
FRANCE
THIS PRODUCT PURCHASE AGREEMENT (this "Agreement") is entered into as of the
Effective Date as set forth below, between HP, a French company, and Seller, a
California company.
EFFECTIVE DATE: July 1, 1996
HP and Seller hereby agree as follows:
1 DEFINITIONS
The following capitalized terms shall have the meanings assigned to them:
1.1 "Delivery Date" shall mean the date specified in a Purchase Order for
the delivery of Products by Seller to the destination required by the
Purchase Order.
1.2 "Eligible Buyers" shall mean the HP Locations, HP Subcontractors and
other third parties mutually agreed to by the parties who may purchase
Products from Seller under this Agreement, as listed in Exhibit C.
1.3 "Field Failures" shall mean any Product received by an Eligible Buyer
then distributed to customers which is or becomes defective due to
non-compliance with Specifications or any other technical requirement
under this Agreement.
1.4 "HP Locations" shall mean HP and its divisions, subsidiaries,
affiliates and other entities controlled by or controls HP.
1.5 "HP Property" shall mean all property, including without limitation
designs, documentation, models, tools, devices, materials, furnished to
Seller by HP or other Eligible Buyer hereunder or paid for by HP or
Eligible Buyer in connection with this Agreement.
1.6 "HP Subcontractors" shall mean third party entities which perform
contract work for HP Locations and which requires Products from Seller.
HP Subcontractors are independent contractors of HP or HP Locations and
are not legally related to HP or HP Location as agent, employee,
partner, joint venturer or other manner.
1.7 "Lead Time" shall mean the minimum period of time between the date of a
Purchase Order and the requested Delivery Date of Products under such
Purchase Order.
<PAGE> 3
1.8 "Noncomplying Product" shall mean any Product received by an Eligible
Buyer which is (i) defective, or otherwise not in conformity with the
applicable, or (ii) not in conformity with the requirements of the
relevant Purchase Order or other provisions of this Agreement; as
determined by the receiving Eligible Buyer prior to distribution to
customers. Noncomplying Products shall include, without limitation,
defective Products, dead-on-arrival's, overshipments, and early
shipments.
1.9 "Products" shall mean the products offered for sale by Seller under
this Agreement as specified on Exhibit A attached hereto. The parties
may mutually amend Exhibit A in writing from time to time to include
new Products or change the Specifications. Products may be hardware
and/or software.
1.10 "Purchase Order" shall mean a written or electronic purchase order
issued by an Eligible Buyer to Seller.
1.11 "Specifications" shall mean the technical and/or functional
requirements of the Product as set forth in and/or referenced in
Exhibit A.
1.12 "Term" shall mean the duration of this Agreement as set forth in
Section 16 below.
2 PURCHASE OF PRODUCTS
2.1 Purchase and Sale of Products. HP shall purchase and Seller shall sell
the Products pursuant to the terms of this Agreement. This Agreement
shall enable all Eligible Buyers to purchase Products from Seller under
the terms and conditions of this Agreement. Seller shall not, without
the prior written approval of HP, allow any party which is not an
Eligible Buyer to purchase Products pursuant to this Agreement. Seller
agrees to the order process as set forth in Exhibit D.
2.2 Forecasts. HP shall provide to Seller, as set forth in Exhibit D,
non-binding forecasts of HP's requirements for Products. Such forecasts
are good-faith estimates and shall be used only for preliminary
planning purposes. Unless otherwise agreed to in writing, such
forecasts shall not constitute or be deemed to be binding commitments
by HP.
2.3 Lead Time. Product Lead-Time, if any, shall be as set forth in Exhibit
B. Seller agrees to use commercially reasonable efforts to accommodate
Purchase Orders which may require a shorter Lead-Time.
2.4 Purchase Order Issue. Each shipment of Products shall be initiated by a
Purchase Order issued to Seller by an Eligible Buyer. Each Purchase
Order shall include:
(i) Product quantity; (ii) unit price; (iii) shipping destination; (iv)
Delivery Date; and (v) other requirements/instructions.
2.5 Purchase Order Acknowledgment. Seller shall either return the
acknowledgment form of a Purchase Order to the Eligible Buyer placing
such order, or object to the Purchase Order, within the number of days
set in Exhibit D. If an ordering Eligible Buyer does not receive an
acknowledgment or objection within such period, Seller is deemed to
have accepted such Purchase Order.
2.6 Order Flexibility. Eligible Buyers may increase, decrease, reschedule
or cancel its Purchase Orders pursuant to the provisions set forth in
Exhibit D.
2.7 Lifetime Buy. In the event that Seller intends to discontinue the
availability of any Product offered under this Agreement, Seller shall
give written notice of such discontinuance of availability to HP at
least [****] in advance of such discontinuance. Within [****] after
receipt of such
<PAGE> 4
notice of discontinuance, HP shall have the right to determine its
lifetime-buy quantities of such Products and to purchase such
quantities in accordance with the provisions of this Agreement.
3 PRICES AND INVOICES
3.1 Pricing. Product prices are set forth in Exhibit B. All prices and
calculations will be made in U.S. Dollars, unless otherwise stated.
Prices shall not be increased unless mutually agreed upon, but may be
reduced by Seller. If during the Term, changed prices are put in effect
by mutual agreement of HP and Seller, or reduced prices are otherwise
put in effect by Seller, such prices shall apply to all Product
shipments made after the effective date of such price change.
3.2 Price Warranty. Seller warrants that the prices quoted for the Products
are not in excess of the lowest prices charged by Seller to other
similarly situated customers for similar quantities of products of like
kind and quality.
3.3 Invoices. Unless otherwise instructed by HP, Seller shall send all
invoices for Products shipped, to the Eligible Buyer location which
issued the Purchase Order for such Products.
3.4 Payment Terms. Unless otherwise agreed in writing, payment terms for
Products ordered under this Agreement shall be net thirty (30) days
after the later of (i) receipt by the ordering Eligible Buyer of an
appropriate invoice from Seller for the Products ordered, or (ii)
receipt by the ordering Eligible Buyer of the Products so ordered.
4 SHIPMENT AND DELIVERY
4.1 Title and Risk. All shipments made on HP designated carriers shall be
F.O.B. Seller's place of shipment at Seller's address as set forth in
Exhibit E. Title to Products released hereunder and risk of loss or
damage shall pass from Seller to HP upon Seller's delivery of the
Products to the carrier specified by HP subject to Seller's obligations
hereunder with respect to packing and loading.
4.2 Shipping Costs.
a. All shipping and transport expenses and duties shall be borne
by the Eligible Buyer unless otherwise set forth in this
Agreement. All expenses related to packing, loading and
delivery of Products to the designated carrier dock shall be
borne by Seller.
b. If Seller ships any Product by a method other than as
specified in the corresponding Purchase Order, Seller shall
pay any resulting increase in the cost of freight incurred
over the cost of freight which would have been incurred had
Seller complied with the Purchase Order's shipping
instructions.
c. If due to Seller's failure to make a timely shipment the
specified method of transportation would not permit Seller to
meet the requested Delivery Date, the Products affected shall
be shipped by air transportation or other expedient means
acceptable to the Eligible Buyer. Seller shall pay for any
resulting increase in the freight cost over that which
Eligible Buyer would have been required to pay by the
specified method of transportation.
4.3 Delivery Delay. Seller shall immediately notify the Eligible Buyer
issuing a Purchase Order of any prospective failure to deliver the
specified quantity of Products ordered on the specified Delivery Date.
All orders shall be shipped complete, as released. Should only a
portion of the Products be available on the Delivery Date, Seller shall
ship the available Products unless directed by the ordering
<PAGE> 5
Eligible Buyer to reschedule the shipment. In the event of a delay in
delivery due to Seller's fault in excess of [* * *] from the original
requested Delivery Date, the Eligible Buyer may impose the late
delivery penalty as set forth in Exhibit D.
4.4 Overshipment. If Seller ships more Products than ordered, the amount of
the overshipment may either be kept by the receiving Eligible Buyer for
credit against future Purchase Orders or returned to Seller pursuant to
Section 8 below, at such Eligible Buyer's election.
4.5 Early Shipment. Seller shall obtain the ordering Eligible Buyer's
approval before making any delivery more than [* * * *] prior to the
specified Delivery Date. If Seller makes an unauthorized early
delivery, the Eligible Buyer may at its option either return the
Products pursuant to Section 8 below or delay processing the invoice
until the original Delivery Date.
4.6 Packing. Seller shall preserve, package, handle and pack the Products
so as to protect the Products from loss or damage, in conformance with
good commercial practice, HP's specifications, government regulations,
and other applicable standards. Seller shall be responsible for any
loss or damage due to its failure to properly preserve, package, handle
or pack the Products. No Eligible Buyer shall be required to assert any
claims for such loss or damage against the common carrier involved, nor
be liable or responsible for any loss, damage, or cost due to a release
of chemicals or other hazardous materials to the environment prior to
receipt of the corresponding Products by the Eligible Buyer. HP packing
and shipping instructions are set forth in Exhibit E attached hereto.
4.7 Packing List. Seller shall provide for all Products, a packing list and
invoice which contain at least the following information: (i) Purchase
Order number; (ii) HP part number (if any); (iii) Seller reference;
(iv) Products quantity shipped; (v) Unit price; (vi) Delivery Date; and
(vii) serial number of each Product unit (if applicable).
4.8 Container Marking. If required by an Eligible Buyer, all shipping
containers shall be marked and/or bar coded as requested by such
Eligible Buyer.
5 PRODUCT WARRANTY
5.1 Product Warranty. Seller warrants that all Products shall: (i)
substantially conform to all Specifications and quality requirements
set forth in Exhibits A and G; (ii) conform to all requirements of
applicable Purchase Orders; and (iii) be free from defects in design,
material and workmanship.
5.2 Warranty Period. Product warranties shall be in effect for a Warranty
Period as set forth in Exhibit F. All Product returns during the
Warranty Period are subject to the provisions of Section 8 below.
5.3 Warranty Disclaimer. EXCEPT AS SET FORTH ABOVE, SELLER GIVES NO OTHER
PRODUCT WARRANTY, IMPLIED OR EXPRESS, AND SPECIFICALLY DISCLAIMS ALL
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE.
6 PRODUCT SUPPORT
6.1 Product Support. Seller agrees to provide Product Support to all
Eligible Buyers as specified in Exhibit F applicable to each Product or
class of Products.
6.2 Product Support during Warranty Period. Product Support is provided
free of charge to HP with
<PAGE> 6
respect to a Product during such Product's warranty period.
7 QUALITY
7.1 Quality Program. Seller shall maintain an objective quality program for
all Products supplied pursuant to this Agreement. Seller shall, upon
HP's request, provide to HP copies of Seller's quality program and
supporting test documentation. Seller shall use its commercially
reasonable efforts to promptly undertake, at its sole expense, all
actions necessary to implement the procedures and processes to achieve
the quality standards set forth in Exhibit G.
7.2 Inspection. HP or its designate shall have the right to inspect, at
HP's expense, Seller's plant both Products and nonproprietary
manufacturing processes for the Products at any time during the Term.
Seller shall provide, at no charge to HP, access to such facilities and
services as are reasonable required by HP in performing any inspection.
Seller shall also ensure that HP has the right to inspect, at HP's
expense, alone or accompanied by Seller, the plants and processes of
Seller's strategic suppliers and subcontractors, including without
limitation Seller's suppliers of chips and contract manufacturers, and
other component suppliers of Seller as may be mutually agreed.
8 RETURN OF PRODUCTS
8.1 Return of Noncomplying Products. All Eligible Buyers shall have the
right to return to Seller all Noncomplying Products, for repair or
replacement, at Seller's expense, pursuant to the provisions set forth
in Exhibit H-1.
8.2 Return of Field Failures. All Eligible Buyers, and their designated
support organization, shall have the right to return to Seller all
Field Failures, for repair or replacement, at Seller's expense,
pursuant to the provisions set forth in Exhibit H-2.
9 ENGINEERING PROCESS OR DESIGN CHANGES
9.1 Engineering Changes. Unless otherwise agreed in writing, Seller agrees
that:
a. No changes in design, process, components, manufacturing
processes or location, or discontinuances affecting the
electrical performance, the mechanical form or fit, the
packaging, the environmental compatibility or chemical
characteristics, or the life, reliability, or quality of a
Product (collectively "Engineering Changes") shall be made or
incorporated in a Product without the prior written approval
of HP, and
b. The Engineering Change process shall be as set forth in
Exhibit I.
9.2 No Effect on Ordering Process. Regardless of whether HP approves a
proposed Engineering Change, the ordering process or lead time
established in this Agreement shall not be changed unless otherwise
agreed.
9.3 HP Engineering Changes. HP may, if needed, change HP-supplied drawings,
designs, or specifications at any time prior to shipment of
corresponding Products. If any change affects the prices or delivery
schedules of Products, an equitable adjustment shall be made provided
that: (i) Seller makes a written claim for an adjustment within [* * *]
from the date HP gives notice to Seller of the change, and (ii) HP
agrees in writing to the adjustment. Engineering Changes shall be
<PAGE> 7
effective after written mutual agreement.
10 HP PROPERTY
10.1 HP Property. All HP Property shall be clearly segregated and identified
as the sole property of HP, and may be provided to a third party by
Seller only after obtaining prior written approval from HP. Seller
shall be bear all costs for damages which may occur to such property.
All HP Property shall be used by Seller only for fulfilling the
performance under this Agreement and shall be returned immediately on
HP's request.
10.2 License to HP Property. HP hereby grants to Seller a non-exclusive,
royalty-free, nontransferable license to use the HP intellectual
property embodied in any HP Property provided to Seller hereunder, for
the sole purpose of: (i) manufacturing and providing Products hereunder
for sale to Eligible Buyer under this Agreement, and (ii) providing
warranty and support services for the Products to Eligible Buyers under
this Agreement.
10.3 Return of Property. Upon either party's request, or upon the expiration
or termination of this Agreement, each party shall return all property
of the other which was loaned to such party, in good condition, normal
wear and tear excepted. Each party shall determine the manner and
procedure for returning the such property. Each party shall pay the
corresponding freight costs, if return is due to request by such party
for convenience or termination of this Agreement for breach against the
other party; otherwise, all return costs shall be borne by party to
which such property was loaned.
11 INTELLECTUAL PROPERTY RIGHTS
11.1 License to Software Products. With respect to any Product which
includes or is comprised of software and/or documentation, Seller
hereby grants to HP and Eligible Buyers a non-exclusive, worldwide
license to use, reproduce, display, and distribute such Product in
object code format solely for use in conjunction with an HP product
which includes any such Product. In no event shall HP offer any Product
as a stand-alone product, except in a support context of repairs,
replacements or updates to existing customers of HP products containing
such Product. Such license shall include the right of HP and Eligible
Buyers to sublicense distributors, resellers, and other third party
channels solely as required to achieve the foregoing. Documentation may
be reproduced and distributed either in electronic or hardcopy format.
Unless otherwise provided as part of a Product, no Eligible Buyer shall
have the right to any Product source code. No Eligible Buyer shall
reverse engineer, disassemble, or otherwise modify any source code of
any Product without written authorization from Seller. Each Eligible
Buyer agrees to reproduce any proprietary rights legends of Seller in
any software or documentation provided by Seller hereunder.
11.2 Infringement Defense by Seller. Seller will defend any third party
claim, suit, or proceeding brought against HP or any Eligible Buyer
insofar as it is based on a claim that any Product or documentation
furnished by Seller under this Agreement constitutes an infringement of
any third party's patent, copyright, trademark, trade name, or
unauthorized trade secret use; provided that Seller is notified
promptly by HP in writing of such claim, and given full authority
(including choice of counsel), information and assistance (at Seller's
expense) to handle the defense or settlement of any such claim, suit or
proceeding. Seller agrees to pay all damages and costs awarded therein
against HP or any Eligible Buyer.
In case any Product or documentation or any part thereof in such suit
is held to constitute an
<PAGE> 8
infringement and its use is enjoined, Seller shall, at its own expense
and at its option, either procure for HP and the Eligible Buyers the
right to continue use the Product; or, if applicable, replace the
Product with a noninfringing Product and documentation of equivalent
function and performance; or modify them so they become noninfringing
without substantially detracting from function or performance, provided
that the Engineering Change Process set forth in Exhibit I is followed.
Notwithstanding the foregoing, Seller shall have no responsibility for
claims arising (i) from modifications of the Product made by HP or any
Eligible Buyer if such claim would not have arisen but for such
modifications, or (ii) from combination or use of the Product with HP
products or any third party products, if such claim would not have
arisen but for such combination or use.
11.3 Removal of Trademarks. Seller shall remove from all Products rejected,
returned or unpurchased by an Eligible Buyer, any name, trademarks,
trade names, insignia, part numbers of any Eligible Buyer prior to any
other sale, use, disposition of such Products by Seller.
12 CONFIDENTIAL INFORMATION
12.1 Confidential Information. As used in this Section 12, the term
"Confidential Information" shall mean: (i) all information of
considered by one party to be confidential, and marked as
"confidential" prior to disclosure to the other party; (ii) all
non-public information or data concerning or related to either party's
products (including the discovery, invention, research, improvement,
development, manufacture, or sale of HP products) or business
operations (including sales costs, profits, pricing methods,
organizations, employee lists, and processes), and all HP Property; and
(iii) all forecasts for production, support, or service requirements
submitted by HP pursuant to this Agreement.
12.2 Exclusions. Notwithstanding any provision to the contrary, the
provisions of this Section 12 shall not apply to any information that:
(i) is rightfully known to the recipient prior to disclosure; (ii) is
rightfully obtained by the recipient from a third party without any
obligation of confidentiality; (iii) is made available by the
disclosing party to the public without restrictions; (iv) is
independently developed by the recipient without reference to any
Confidential Information of the disclosing party; or (v) is disclosed
by the recipient with the prior written approval of the original
disclosing party.
12.3 Nondisclosure. Neither party shall disclose to any person or entity,
other than its employees who have a need to know and are under
confidentiality obligations, any Confidential Information of the other
party, whether written or oral, which one party may obtain from the
other, or otherwise discover in the performance of this Agreement.
Without limiting the generality above, the recipient of Confidential
Information shall maintain all such Confidential Information in strict
confidence. The recipient shall take all reasonable steps to ensure
that no unauthorized person or entity has access to Confidential
Information of the disclosing party, and that all authorized persons
having access to Confidential Information refrain from any unauthorized
disclosure.
13 GOVERNMENTAL COMPLIANCE
13.1 Compliance. Each party warrants that it shall comply with all
applicable laws, rules and regulations applicable to its obligations
under this Agreement or to Products supplied hereunder, including
without limitation all applicable import/export, environmental and
safety rules and regulations.
13.2 Information. Seller shall furnish to HP or an Eligible Buyer with any
information required during the term of this Agreement to enable HP or
such Eligible Buyer to comply with the requirements of any government
agency in its use of the Products. Seller shall provide HP or Eligible
Buyer with all required material safety data sheets prior to shipping
any Product.
<PAGE> 9
13.3 Restricted Rights Notice. HP shall ensure that any Seller software
distributed, directly or indirectly, by HP to the United States
Government shall be distributed pursuant to an agreement that contains
the appropriate "restricted rights" language.
14 IMPORT REQUIREMENTS AND MANUFACTURING SITE
14.1 Certification. Upon HP's request, Seller shall provide HP or an
Eligible Buyer with an appropriate certification stating the country of
origin for the Products, sufficient to satisfy the requirements of (i)
the customs authority of the country of receipt, and (ii) any
applicable export licensing regulations
14.2 Country of Origin Marking. Seller shall mark each Product (or the
Product's container if there is no room on the Product) with the
country of origin. Seller shall, in marking Products, comply with the
customs authorities of the country of receipt.
14.3 Importer of Record. If any Products are imported, Seller shall when
possible allow the Eligible Buyer to be the importer of record. If the
Eligible Buyer is not the importer of record and Seller obtains duty
drawback rights to the Products, Seller shall, upon request, provide
such Eligible Buyer with documents required by the customs authorities
of the country of receipt to prove importation and to transfer duty
drawback rights to such Eligible Buyer.
14.4 Manufacturing Site. Seller warrants that the Products will be
manufactured at the manufacturing site as set forth in Exhibit A, which
site has been qualified by HP. Any change in manufacturing facility
shall be considered an Engineering Change subject to Section 9 above.
15 FORCE MAJEURE
15.1 Force Majeure. Nonperformance of either party will be excused to the
extent that performance is rendered impossible by strike, fire, flood,
earthquake, governmental acts or orders or restrictions or other
similar reason where failure to perform is beyond the control and not
caused by the negligence of the non-performing party (collectively,
"Delaying Cause"), provided that the non-performing party gives prompt
notice of such conditions to the other party and makes all reasonable
efforts to perform.
15.2 Purchase Order Cancellation. In the event of a Delaying Cause being
greater than [****], the ordering Eligible Buyer may elect to
cancel the Purchase Order affected by such event without any penalty.
16 TERM AND TERMINATION
16.1 Term and Renewal.
a. Unless otherwise terminated or extended under this Section 16
the Term of this Agreement shall be the period of time
commencing on the Effective Date and continuing for [* * *]
thereafter.
b. The Term of this Agreement will be automatically extended for
an additional [* * *], unless written notice of its intention
of non-renewal from one party is received by the other no
later than ninety (90) days prior to the end of the initial
Term or an extended Term.
<PAGE> 10
16.2 Termination for Cause. Either party may terminate this Agreement in the
event of:
a. Any failure of the other party to perform its material
obligations under this Agreement, if such failure is not cured
within thirty (30) days after receipt of written notice from
the non-breaching party.
b. Any commencement of voluntary or involuntary proceeding in
bankruptcy, insolvency or any similar situation arising
against the other party, or appointment of any receiver or
assignee, unless such proceeding or appointment is dismissed
within sixty (60) days after the date of such commencement or
appointment.
c. Any change in controlling interest or ownership of the other
party, without the prior written approval of the non-changing
party (which approval will not be unreasonably withheld).
16.3 Effect of Expiration or Termination.
a. All Purchase Orders issued prior to the effective date of the
expiration or termination of this Agreement shall be fulfilled
pursuant to and subject to the terms of this Agreement, even
if the Delivery Dates of Products under such Purchase Orders
are after the effective date of expiration or termination;
unless such termination is effected by Seller due to a
material breach by HP.
b. Each party shall return to the other party all property loaned
by the other party, upon the expiration or termination of this
Agreement pursuant to Section 10.3. All licenses granted by HP
to Seller to any HP Property shall automatically terminate
upon expiration or termination of this Agreement.
16.4 Manufacturing Rights.
a. In the event that Seller is declared bankrupt or goes into
receivership, then Seller shall make available to HP all
manufacturing designs, drawings, documents and other necessary
materials, including without limitation source code for
software necessary for HP to manufacture, have manufactured,
use an sell the Products. In such an event, Seller grants to
HP a non-exclusive license to use the intellectual property
rights in such Seller materials for the sole purpose of
making, having made, using and selling the Products for the
period that is the shorter of: (i) the Term of this Agreement;
or (ii) until Seller is out of bankruptcy or receivership.
b. In the event that Seller is unable to supply HP with the
quantity of Products agreed to pursuant to this Agreement due
to a Delaying Cause (as set forth in Section 15), Seller shall
use its commercially reasonable efforts to manufacture such
Products at a HP-qualified site (provided, however, that HP
has made such a secondary HP-qualified site available to
Seller, which failure to do so shall relieve Seller of its
obligations under this paragraph) or shall enter into good
faith negotiations with HP to provide either the Products or
the manufacturing rights described in this Section 16.4 to HP,
for a period that is the shorter of: (i) the Term of this
Agreement; or (ii) until Seller resumes manufacturing the
Products.
c. In the event that HP terminates this Agreement for breach by
Seller, Seller shall negotiate with HP in good-faith to grant
HP or another manufacturer the necessary manufacturing rights
for the Products until such time as HP has identified and
purchases similar products from a second source.
16.5 Survival. The rights and obligations under the following Sections shall
survive any expiration or earlier termination of this Agreement:
Section 5 (Product Warranty); Section 6 (Product Support);
<PAGE> 11
Section 10.3 (Return of HP Property); Sections 11 (Intellectual
Property Rights) provided that with respect to Section 11.1, only the
licenses properly granted to customers of HP products prior to the
expiration or termination of this Agreement, shall survive; Section 12
(Confidentiality); Section 13 (Governmental Compliance) with respect to
any surviving obligations, as required by applicable law; Section 16.3
(Effect of Expiration or Termination) and this Section 16.5; Section 17
(Limited Liability); Section 19 (Other Provisions).
17 LIMITED LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT,
CONSEQUENTIAL OR SPECIAL DAMAGES ARISING FROM ANY CLAIM OR ACTION
HEREUNDER, BASED ON CONTRACT, TORT OR OTHER LEGAL THEORY.
18 RELATIONSHIP MANAGEMENT
18.1 Relationship Managers. Each party designates the person set forth in
Exhibit J as the primary contact of each party with respect to this
Agreement, which person may be redesigned by a party by notice to the
other.
18.2 Primary Contact. The parties agree that the material terms and
conditions of this Agreement have been negotiated between HP and
Seller, and that HP shall be the primary contact with respect to the
administration of this Agreement, and to any further negotiations or
amendments hereto, notwithstanding other Eligible Buyers' ability to
purchase Products under this Agreement.
18.3 Dispute Resolution. In the event of disagreement with respect to any
aspect of this Agreement, the parties agree to discuss in good-faith to
reach an amicable resolution, and to escalate such resolution process
to the appropriate members of their respective management organization
who have the power and authority to achieve a successful resolution.
This Section 18.3 is in addition to, and shall in no way be construed
as limiting, any rights, remedies and actions arising under this
Agreement and available to the parties in law or equity.
18.4 Notice. Unless otherwise stated, all notices required under this
Agreement shall be in writing and shall be considered given upon
personal delivery of the written notice or within five (5) days after
posted by mail, certified or registered, and addressed to the
appropriate relationship manager as set forth in Exhibit J.
19 OTHER PROVISIONS
19.1 Publicity. Each party agrees not to publicize or disclose the existence
or terms of this Agreement to any third party without the prior written
consent of the other except as required by law. In particular, no press
releases shall be made without the mutual written consent of each
party.
19.2 Independent Contractors. The relationship of the parties under this
Agreement is that of independent contractors, and neither party is an
employee, agent, partner or joint venturer of the other.
19.3 No Assignment. Neither party may assign or transfer any of the rights
or responsibilities set forth herein, or change its control of
ownership, without the express written consent of the other party
(which consent shall not be unreasonably withheld or delayed) and any
purported attempt to do so shall be deemed void. Notwithstanding the
foregoing, Seller agrees that all Eligible Buyers may
<PAGE> 12
purchase Products under the terms of this Agreement to the same extent
as HP as contemplated under this Agreement, and that HP may assign its
rights to its parent company, Hewlett-Packard Company, a California
corporation.
19.4 Governing Law. This Agreement is made under and shall be construed in
accordance with the law of the State of California, without reference
to conflict of laws principles. Any claim or suit with respect to this
Agreement shall be brought in the jurisdiction in which the
non-complaining party resides.
19.5 Severability. The terms of this Agreement shall be applicable severally
to each Product, if more than one, and any dispute affecting either
party's rights or obligations as to one or more Product(s) shall not
affect the rights granted hereunder as to any other Product. If any
provision of this Agreement is held to be invalid or unenforceable by a
court of competent jurisdiction, then the remaining provisions will
nevertheless remain in full force and effect, and the parties will
negotiate in good-faith a substitute, valid and enforceable provision
which most nearly effects the parties' intent in entering into this
Agreement.
19.6 Headings. The captions and headings used in this Agreement are for
convenience in reference only, and are not to be construed in any way
as terms or be used to interpret the provisions of this Agreement.
19.7 No Purchase Obligation. Except as expressly provided herein, HP or any
other Eligible Buyer may in its sole discretion decide purchase or not
purchase any Product as it deems appropriate.
19.8 Non-Restrictive Relationship. Nothing in this Agreement shall be
construed to preclude HP or any other Eligible Buyer from independently
developing, acquiring from other third parties, distributing or
marketing other products which may perform the same or similar
functions as the Products provided under this Agreement.
19.9 Modifications. This Agreement may only be modified only by writing
signed by an authorized representative of each party.
19.10 Waiver. Neither party's failure to exercise any of its rights hereunder
shall constitute or be deemed a waiver or forfeiture of any such
rights.
19.11 Entire Agreement. This document and its attachments represent the
entire agreement between the parties as to the matters set forth herein
and supersedes all prior discussions, representations or understandings
between them, except for prior agreements specifically referenced
herein and made a part hereof. The ten-terms and conditions of this
Agreement shall supersede all preprinted terms on any Purchase Order or
acknowledgment, or other terms contradictory to the provisions herein.
19.12 Exhibits. All Exhibits attached to this Agreement shall be deemed a
part of this Agreement and incorporated herein by reference.
EXHIBIT A PRODUCT DESCRIPTION AND SPECIFICATIONS
EXHIBIT B PRODUCT PRICING AND LEADTIME
EXHIBIT C ELIGIBLE BUYERS
EXHIBIT D ORDER PROCESS
EXHIBIT E PACKING AND SHIPPING INSTRUCTIONS
EXHIBIT F MATERIALS PROCUREMENT
EXHIBIT G QUALITY REQUIREMENTS
EXHIBIT H-1 NONCOMPLYING PRODUCT RETURN
EXHIBIT H-2 FIELD FAILURE SUPPORT
EXHIBIT I ENGINEERING CHANGE PROCEDURE
EXHIBIT J RELATIONSHIP MANAGERS
<PAGE> 13
19.13 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
AGREED:
HP: SELLER:
HEWLETT-PACKARD FRANCE ACCELGRAPHICS, INC.
By: /s/ Jean Charles Miard By: /s/ Nancy E. Bush
--------------------------- ----------------------
Print: Jean Charles Miard Print: Nancy E. Bush
------------------------ -------------------
Title: GM - PDCO Title: CFO
------------------------ -------------------
<PAGE> 14
PRODUCT PURCHASE AGREEMENT
BETWEEN
HEWLETT-PACKARD FRANCE
AND
ACCELGRAPHICS, INC.
EXHIBITS
SELLER: ACCELGRAPHICS, Inc.
1942 Zanker Road
San Jose, CA 95112
United States
HP: HEWLETT-PACKARD FRANCE
Performance Desktop Computing Operation
5, avenue Raymond Chanas - Eybens
38053 Grenoble, Cedex 9
FRANCE
EFFECTIVE DATE: July 1st 1996
<PAGE> 15
EXHIBITS
EXHIBIT A PRODUCT DESCRIPTION AND SPECIFICATIONS
EXHIBIT B PRODUCT PRICING AND LEADTIME
EXHIBIT C ELIGIBLE BUYERS
EXHIBIT D ORDER PROCESS
EXHIBIT E PACKING AND SHIPPING INSTRUCTIONS
EXHIBIT F PRODUCT WARRANTY AND SUPPORT
EXHIBIT G QUALITY REQUIREMENTS
EXHIBIT H-I NONCOMPLYING PRODUCT RETURN
EXHIBIT H-2 FIELD FAILURE SUPPORT
EXHIBIT I ENGINEERING CHANGE PROCEDURE
EXHIBIT J RELATIONSHIP MANAGERS
<PAGE> 16
EXHIBIT A
Revision of August 5th 1996
PRODUCT DESCRIPTION AND SPECIFICATIONS
- Name of the product: AccelPRO TX 2500
PCI OpenGl Accelerator for PCI
Revision A modified as identified during LP test (Heat-sink,
full size bracket, R75, Internal source, Video signal
ferrites).
No option
Hewlett Packard part-number: 5064-0241
Hewlett Packard support (re-order) part-number: 5064-0296
- Hardware product specifications:
* Graphics hardware accelerator PCI, OpenGl compliant, includes:
- Rendering accelerator GLINT 500TX
- Setup accelerator Glint Delta TX
- VGA AdvanceLogic ALG2064
- RAMDAC Texas Instrument TVP3026
- 8 MegaBytes frame buffer (VRAM)
- 8 MegaBytes Z-buffer (DRAM)
- Software product specifications (not delivered with the product but
provided to Hewlett Packard and covered by this agreement):
* drivers for Windows NT versions 3.51 and 4.0
* control applet version 3.1
- Marking:
Each board must have a white sticked label with the following black printed
informations:
- - HP part-number, as set forth in Exhibit A
- - the mention "Made in YYYY"
- - the serial number (number and bare code)
The engineering and manufacturing date codes must be mentioned too.
Bare code standard code is 39. Specifications will be communicated separately to
ACCELGRAPHICS Inc. by HP Vendor Account Manager.
- The product will be manufactured at the following site:
MAT Technologies Limited,
No. 101-102 Estate Center Building,
19 Dai Cheong Street,
Tai Po Industrial Estate,
New Territories, Hong Kong.
See site change HIP approval procedure in Exhibit I.
- Regulatory compliance:
UL or CSA (Safety USA)
FCC ID, EN (RFI certifications)
CE (801.2, 801.3, 801.4 certifications)
- All boards will be tested with ICT equipment and functionally in HP PC
before to be shipped to Eligible Buyers as defined in Exhibit C. HP PCs
costs will be agreed upon and shared by both companies.
<PAGE> 17
EXHIBIT B
PRODUCT PRICING AND LEADTIME
- - Product pricing:
[* * *]
[* * *]
- - Lead time:
[* * *]
- - [* * *]:
[* * * *].
- - [* * *].
- - Price forecast:
[* * * *].
- - Currency/Invoicing:
All prices agreed upon between ACCELGRAPHICS, Inc. and HP are
stated in US $ Eligible Buyers will always be invoiced in US $.
<PAGE> 18
EXHIBIT C
ELIGIBLE BUYERS
These are the locations that may pass orders to ACCELGRAPHICS, Inc.:
[* * * *].
[* * * *].
[* * * *].
[* * * *].
[* * * *].
[* * * *].
[* * * *].
[* * * *].
<PAGE> 19
EXHIBIT D
ORDER PROCESS
1. Ordering process
- Product orders shall only come in writing from Eligible Buyers as set
forth in Exhibit C.
- HP shall send non binding purchasing forecasts to ACCELGRAPHICS,
Inc., on a [* * *], on a [* * *]rolling window.
- Purchase Orders Acknowledgment: in writing within [* * * * *]after
receipt of a Purchase Order.
- On an exception basis, in case of sudden increase or decrease of the
required short-term Eligible Buyer deliveries, HP will send new [* *
*] non binding consolidated forecasts which will replace the previous
one, subject to the flexibility agreed in Exhibit D.
- HP will manage any allocation priorities between Eligible Buyers.
- Priority between Eligible Buyers: Orders received by ACCELGRAPHICS,
Inc. from Support Repair locations listed in Exhibit C have priority
over all other HP orders.
- Shipping informations: [* * * *].
2. Orders flexibility
- [* * *]: During the [* * * * * *], ACCELGRAPHICS, Inc. will [* * *]
which will allow [* * * *].
- Purchases order changes: After the [* * *], ACCELGRAPHICS, Inc. will
use the following flexibility schedule and rescheduling flexibility:
- - Cancellation:
* From first product shipment to HP and until [* * * *] HP may
without charge change or cancel any portion of each order if HP gives
Seller notice at least [* * *] calendar days prior to the delivery date
for standard Goods and Services (i.e. all Goods or Services other than
custom).
* [* * *] of product life: Acknowledged product orders cancellation
for this period will be at [* * *] to HP.
- - Orders flexibility for quantities [* * *] units /month:
* [* * *]
* [* * *]
* [* * *]
- - Orders flexibility for quantities [* * *] units /month:
* [* * *]
* [* * *]
* [* * *]
This flexibility must be measured on the aggregate of all volumes ordered by all
Eligible Buyers to ACCELGRAPHICS, Inc.
<PAGE> 20
- Upsides/Downsides: if Eligible Buyers are passing orders beyond the
limit above, the following rules have to be followed by both parties:
- - for orders decrease, Eligible Buyers will use the Change Order process and
ACCELGRAPHICS, Inc. will make a reasonable effort to meet these demands.
- - for order increases, Eligible Buyers will issue NEW ORDERS to ACCELGRAPHICS
Inc. that will be acknowledged separately by ACCELGRAPHICS, Inc. (reasonable
effort).
- Flexibility performance evaluation: ACCELGRAPHICS, Inc. to meet HP
changing volume demands is an important part of ACCELGRAPHICS, Inc.
"Responsiveness" score within the TQRDC periodic performance
evaluation. ACCELGRAPHICS, Inc.'s flexibility will be scored based on
satisfaction of demands for contractual flexibility as well as demand
for flexibility BEYOND the normal contractual flexibility schedule as
described in this section above according to the score table below:
- - 4 Consistently exceeds expectations,
- - 3 Consistently meets and occasionally exceeds expectations,
- - 2 Consistently meets expectations,
- - 1 Occasionally meets expectations,
- - 0 Consistently does not meet expectations.
- Allocation: in allocation process, ACCELGRAPHICS, Inc. commits to ship
on time acknowledged quantities to Eligible Buyers and will do its best
efforts to satisfy non acknowledged orders in a reasonable lead time on
parity with its other OEM customers.
- Life time buy: see paragraph 2.7, page 3 of the contract.
- Late delivery penalties: [* * *]
- [* * *].
3. Minimum and multiple order quantity
Orders will contains at least 10 units and will be ordered in multiple of 10
units.
<PAGE> 21
EXHIBIT E
PACKING AND SHIPPING INSTRUCTIONS
- ACCELGRAPHICS Inc. will arrange for product pick up times by
Eligible Buyers designated freight carriers at the following
address:
ACCELGRAPHICS, Inc., 1942 Zanker Road,
San Jose, CA 95112, United Sates
- Boards will be shipped in bulks of 10 units.
- Optimal loading: ACCELGRAPHICS, Inc. will make reasonable
effort for optimal freight cost, in particular:
- - ACCELGRAPHICS Inc. will avoid partial shipments
- - ACCELGRAPHICS Inc. will ensure the engineering date-code is homogeneous
within a box
- - ACCELGRAPHICS will avoid unfilled boxes subject to previous line request
- Each box of bulks will be identified with a label indicating:
- part-number
- quantity in the box (full letter and bar-coded)
- ship date (full letter only)
- manufacturing date-code
- Each pallet of boxes will receive on a plastic film a large
label indicating part-number, quantity on pallet (full letter
and bare-coded). The standard bare-coded printing is 39.
- Accompanying documents: ACCELGRAPHICS, Inc. shall provide, for
all separate boxes of any shipment of products, a packing list
and "pro-format" invoice which together contains at least the
following informations:
- - the engineering date code
- - the HP part-number
- - ACCELGRAPHICS, Inc.'s reference number
- - the quantity of products shipped
- - the date of shipment
- - the unit price (as set forth in Exhibit B)
- Delivery performance within the TQRDCE (T=Technology,
Q=Quality, R=Responsiveness, D=Delivery, C=Cost,
E=Environment) periodic performance evaluation: ACCELGRAPHICS
Inc. performance will be appreciated on several criteria:
- - On Time Delivery (OTD): evaluated on each individual schedules delivery: On
time (-3/+O) delivery:
* on time if shipped within a windows 0/-3 of the acknowledged ship
date
* early if before
* late if later
Score: 4 95% on time or better,
3 [85.95%[ on time,
2 [70.85%[ on time,
1 [60.70%[ on time,
0 Less than 60% on time.
- - Orders acknowledged within 2 (two) working days
- - No discrepancies in quantities, mixed boards, invoicing price/quantities,...
- - Pro-activity on shipments delinquencies
<PAGE> 22
EXHIBIT F
PRODUCT WARRANTY AND SUPPORT
1. Warranty period
- - Product warranties shall be in effect for a Warranty Period of the shorter of:
(i) [thirty six (36) months] from the date that a Product is received by a
customer as part of an HP product; or (ii) [thirty nine (39)] months from the
date that a Product is received by the ordering Eligible Buyer.
- - Starting warranty period: shipment date of the product from ACCELGRAPHICS,
Inc.
During this period, the repaired boards, if repaired by ACCELGRAPHICS, Inc., are
repaired free of charge and, if repaired by HP, are charged to ACCELGRAPHICS,
Inc. according to Exhibit H-2. Out of the Warranty period, the repaired boards,
if repaired by ACCELGRAPHICS, Inc., are charged to HP according to Exhibit H-2.
and, if repaired by HP, are NOT charged any more to ACCELGRAPHICS, Inc.
2. Diagnostics
Diagnostic code is provided by ACCELGRAPHICS, Inc. to HP in the form as agreed
separately for use exclusively to HP related products defined in Exhibit A. In
the event that ACCELGRAPHICS, Inc. modifies these diagnostic codes,
ACCELGRAPHICS, Inc. will provide HP with the latest revision of the code for
use exclusivelyrelated to ACCELGRAPHICS, Inc. products defined in Exhibit A.
HP has the right to duplicate the diagnostics only for the purposes defined
below:
- HP final assembly
- BP repair centers
- HP field support organizations
- End user (HP customer) for self first trouble shooting
3. Manufacturing documentation
ACCELGRAPHICS, Inc. shall provide HP with the latest updated version of the
following documentation:
- Approved Vendor List
- Material list (component type and location on the board)
- Revision history
- Drivers and applet latest revision (.exe file)
- Functional manufacturing tests programs
A copy of the updated documentations and a "no-change" note for each of the
unchanged ones will be sent to HP Vendor Account Manager at the beginning of
each calendar quarter.
4. Technical support
4.1 Process
Technical support period is set at [* * *] after the last product is shipped
from AccelGraphics, Inc. to HP.
ACCELGRAPHICS Inc. shall support the products as defined in Exhibit A during the
entirety of the product life and support life. During this period,
ACCELGRAPHICS, Inc. shall maintain technical expertise on its products.
Technical expertise includes:
- trained personnel
- assigned contact person to HP (support program manager)
- tools and equipment specific to the repair of boards, kept and
maintained operational
- access to the updated documentations as stated in paragraph 3, above
- access to spare sparts.
<PAGE> 23
4.2 Technical contacts
Each party will designate two technical contacts for US and Europe and a support
program manager as set forth in paragraph 6. The program manager may also serve
as a technical contact. All changes in contacts should be directed to the
program manager in writing. Either party may contact the other to obtain
assistance with the products of common customers. Either technical contact may
be contacted. The preferred communication medium to use is e-mail.
The contact receiving the call shall address the problem or involve the
necessary resources to address the problem. The originating contact shall be
notified of the problem resolution and then deliver the solution to the common
customer. The originating party may close the issue when it deems appropriate.
Any problems in the call process between contracts will be brought to the
attention of the support program managers as listed in paragraph 6.
The acknowledge time for a submitted non-hotsite problem shall be one working
day.
In order to reduce the time of resolution, a specified amount of problem related
information has to be communicated. The required data for problem escalation are
listed in paragraph 6.
The technical contacts in each region shall have a monthly phone conference to
exchange technical information, outstanding issues, etc.
The support program managers shall review the support process quarterly, and
implement changes if required.
4.3 Technical Training
ACCELGRAPHICS, Inc. shall provide technical training for HP technical support
engineers on ACCELGRAPHICS, Inc. related issues. One training per product launch
or major engineering change [* * *] in the US and Europe. Reasonable efforts
shall be made by both parties to schedule training at mutually convenient times.
All other additional training will be [* * *].
HP has the right to duplicate training materials provided by ACCELGRAPHICS,
Inc.,and distribute it to the HP support organizations.
4.4 Information Exchange
Each party shall provide the other, free of charge, with all product related
technical information and tools like (as available from each party):
- - product specifications (technical datasheets)
- - technical literature
- - software updates
- - diagnostic utilities
- - presales support materials (e.g. demo software)
- - known problems list, including other OEM's known problems for Intel Based
platforms
- - Frequently Asked Questions
All relevant technical information is to be provided to the technical contacts
listed in paragraph 6 for each party. The information distribution process shall
be managed by the support program managers.
5. Problem solving
During the same period, ACCELGRAPHICS, Inc. shall provide responses to HP on
bugs and problems reported by HP (Vendor Account Manager, Lab, Technical Support
organizations) of its products.
<PAGE> 24
Upon finding of a technical issue by one of the HP teams listed above, the
designated ACCELGRAPHICS, Inc. experts shall provide HP with an action plan
within the following response timeframe following receipt of the technical
issue:
Type of technical issues as determined by HP
<TABLE>
<CAPTION>
acknowledge action plan within
time
(within the principal periods of service, see 6.)
<S> <C> <C>
5.1 HOT SITE: requires immediate attention to fix [* * *] [* * *]
product misfunction as used by a major customer or
in a major deal that could generate significant revenue
loss to HP.
5.3 NORMAL: not a HOT SITE [* * *] [* * *]
</TABLE>
ACCELGRAPHICS, Inc. will keep records of bugs and problems reported by BP with
their status and the mutually agreed action plan for each item.
<PAGE> 25
6. Technical contacts list
HEWLETT PACKARD ACCELGRAPHICS
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] . ..........................
a) Technical contacts US
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *]:
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *]:
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
Principal Period
of Service: [* * * *] [* * * *]
[* * * *] ..........................
b) Technical Contacts Europe
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *]
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
Secondary contact:
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
[* * * *] ..........................
Principal Period
of Service: [* * * *] [* * * *]
[* * * *] ..........................
<PAGE> 26
EXHIBIT G
QUALITY REQUIREMENTS
1. Definitions
- Quality program:
ACCELGRAPHICS shall, upon HP's request, provide HP
with copies of ACCELGRAPHICS programs and supporting
tests documentation.
- Inspection/corrective actions:
In case of emergency (fire, strike, contingency), HP
will exercise its right to visit ACCELGRAPHICS, Inc.
manufacturing site.
All costs incurred by HP in conducting inspections
shall be borne by HP.
ACCELGRAPHICS, Inc. shall provide a corrective action
plan for any discrepancies reported by HP within [* *
*].
- Annualized Failure Rate By Month Reported (AFR BMR):
A failure is a substantial deviation in the
performance of the product which seriously impairs
its functionality, its safety, or its compliance with
the regulation standards as defined in the product
specifications.
The failure rate measure is provided by HP quality
department. The HP reporting system is recognized and
agreed by ACCELGRAPHICS, Inc.
The failure rate measurement used for the
ACCELGRAPHICS, Inc. items is calculated as follows:
The 3 months AFR BMR is the ratio of:
The number of failures reported from month M-2 to
Month M multiplied by 1200
--------------------------------------------
The installed base under warranty of the product
between month M-2 and month M
Installed base at month M is the number of units
SHIPPED by HP distribution centers from the month
M-36 to M-1.
- Excessive AFR:
This condition exist when the AFR BMR is higher than
the agreed "AFR BMR limit" as listed in the table
below. This excessive AFR can be generated by
multiple causes (failure modes), multiple symptoms,
effects or by an epidemic failure condition.
Epidemic failure are failures due to a defect in
design, materials, or workmanship (as stated within
this agreement) existing at the time of delivery but
not discernible at that time and causing the same
failure mode traced down to one or more components
closely linked. Nevertheless, failures do not include
normal wear out of components and are only considered
within the first 39 months from original shipment by
ACCELGRAPHICS, Inc.
- Non-complying product rate:
<PAGE> 27
The non-complying failure rate is defined as the amount of
products, which are rejected at Eligible Buyers manufacturing
locations divided by the amount of products assembled by
Eligible Buyer within the same period. The non-complying
product rate shall be defined by product. Only products
rejected due to a cause that is the direct result of critical
errors in ACCELGRAPHICS, Inc.'s design or production phase,
including components, will be included within the calculation
of the non-complying product rate.
Critical error is a substantial deviation in the performance
of the product which seriously impairs its functionality,
safety or compliance with the regulatory standards as defined
in the product specifications.
ACCELGRAPHICS, Inc. shall provide HP on a monthly basis the
current repair results data on complying products (parts,
components,...).
ACCELGRAPHICS, Inc. will maintain historical records for each
defective board returned by HP.
2. Quality level limits:
<TABLE>
<CAPTION>
- AFR BMR: target limit
<S> <C> <C>
1st quarter shipment [* *] [* *]
2nd quarter shipment [* *] [* *]
3rd quarter shipment and after [* *] [* *]
- Non Complying Product Rate (NCPR): target limit
1st quarter shipment [* *] [* *]
2nd quarter shipment and after [* *] [* *]
</TABLE>
3. Procedure in case of quality deviation
- AFR BMR between "target" and "limit"
If the AFR reaches or exceeds the "target" failure rate, HP shall have
the right to hold shipment from ACCELGRAPHICS, Inc. pending resolution
of the quality issue and ACCELGRAPHICS, Inc. shall provide a corrective
action plan to HP. Such action plan shall document the ability to cure
the AFR BMR and bring it back below the agreed upon limit.
If the AFR is beyond the agreed "target", AND if the root cause can be
traced down to solely ACCELGRAPHICS responsibility, HP have the right
to have its on hand inventory reworked at a location to be agreed upon
by both parties, at no cost to HP. If the root cause is a combination
off ACCELGRAPHICS and HP causes, the cost of the rework will be
prorated between the two parties.
- AFR BMR Greater Than "Limit" (Excessive AFR condition)
HP shall notify ACCELGRAPHICS, Inc. as soon as an excessive AFR BMR
condition is suspected. ACCELGRAPHICS, Inc. and HP will them meet
together:
a) to analyze the situation and mutually agree upon whether it is an
excessive failure rate and whether or not it is ACCELGRAPHICS, Inc.
responsibility;
b) to decide on the most cost-effective way of solving the excessive
failure (this may include a preventive action plan);
<PAGE> 28
c) to decide on the way HP and ACCELGRAPHICS, Inc. will share the costs
of travel and labor expenses or a products recall for fixing the
installed base, in case it is ACCELGRAPHICS, Inc. responsibility. As an
alternative, ACCELGRAPHICS will credit [* * * *] for each failure in
excess of the target AFR. ACCELGRAPHICS, Inc. will be responsible for
the parts costs.
In any event, the data supplied by HP to substantiate the claim for
excessive failure rate must be verifiable and accepted by Accelgraphics
Inc. and must not be caused by misuse, abuse or modification of the
equipment or by the buyer's faulty service procedure, materials and
tools.
- Continuous improvement
In order to continuously improve the product quality and reliability,
ACCELGRAPHICS, Inc. will record and analyze defects appearing in its
production process.
Quality data will be summarized monthly and faxed//emailed to HP Vendor
Account Manager. This report will be called "Weekly Quality Report" and
will include process yield sorted by process step and component types.
<PAGE> 29
EXHIBIT H-1
NONCOMPLYING PRODUCT RETURN
1. Return Materials Authorization
Definition: Non-Complying Products (NCP), are Products rejected at Eligible
Buyer manufacturing locations before shipment to end-users, due to a cause that
is the direct result of critical errors in ACCELGRAPHICS, Inc.'s production
process, including component acceptance, boards marking, packing and shipping.
Non-complying products may be returned by HP Eligible Buyers to ACCELGRAPHICS,
Inc. Prior to returning the products, the Eligible Buyers shall obtain a Return
Material Authorization (RMA) from ACCELGRAPHICS, Inc. in accordance with
ACCELGRAPHICS, Inc. Customer Return Material Process. The following data must be
submitted (in english) for obtaining an RMA number:
- Part number and quantity
- Serial number and engineering revision (code)
- Reason for return (expertise report)
2. RMA number delay
Unless further verification is reasonably required by ACCELGRAPHICS, Inc.,
ACCELGRAPHICS, Inc. shall supply an RMA number within two (2) days of receipt of
the request. If further verification is required, the RMA number shall be
supplied by ACCELGRAPHICS, Inc. within five (5) days of receipt of the request.
3. Shipment of products
RMA products may be returned "freight collect" from ACCELGRAPHICS Inc.
4. [* *]
[* * * * * * *].
5. Treatment of Non-Complying Products
ACCELGRAPHICS, Inc. is authorized to ship non-complying Products returned by HP
as "new" Products, after repair and re-labelling to the current engineering
revision level and/or part-number. In order to avoid any end-of-life excess
related to NCPs, the ACCELGRAPHICS, Inc. is strongly encouraged to treat NCPs on
an on-going basis in order to ship them back as new Products as soon as
possible. Also, it is requested that the ACCELGRAPHICS Inc.
maintains regular statistics on NCP return ratios.
HP will accept no liability whatsoever related to NCPs end-of-life excess.
In order to better assess the causes of line returns and ultimately improve the
line yield, ACCELGRAPHICS, Inc. is requested to test NCP returns BEFORE
"upgrading" boards (whenever appropriate).
6. Reporting for Non Complying Products: see Section 1
7. Upgrade/Rework Purchase Orders
Non-Complying Product returns are to be distinguished from returns of Products
to ACCELGRAPHICS, Inc. for the purpose of upgrade and/or rework. In this
specific case, the return shall be accompanied by a purchase order for the price
of the rework to be done.
<PAGE> 30
EXHIBIT H-2
FIELD FAILURE SUPPORT
In the following section, HP means, in particular, HP-SME and/or HP-SMC i.e. the
HP repair and support organizations respectively located in Europe-France and in
the US-California (see Section C). This section will first establish
definitions, then describe the required operating processes for the Repair
activity.
1. Definition
1.1 "Product Life" shall mean the period of time from the first shipment of
Product to an Eligible Buyer to the last shipment of Product following the last
Purchase Order.
1.2 "Support Life" shall mean the [* * * * *] period of time starting on the
date of the last shipment of Product following the last Purchase Order.
1.3 "SpareParts" are defined as being boards either coming out of the normal
production flow or repaired-and-upgraded Products fully compliant with the
current production revision status. Spare Parts are individually packaged
according to HP specifications.
1.4 "Field Failures" or "Product Field Failures" or "Board Field Failures" or
"Field Service Returns (FSR)" are defined as Product failures occurring at an HP
customer site, in the field (i.e. at distributor or end-user sites)
1.5 "Spare Part Service":
HP shall be able to order spare parts from ACCELGRAPHICS, Inc. at any time until
[* * * *] after the Product Life ends.
1.6 "Spare component service":
Spare components are those components that belong to the BOM (Bill of Materials)
and AVL (Approved Vendor List) of a particular Product. In the case HP perform
the repair, HP shall be able to order from ACCELGRAPHICS, Inc. spare components
belonging to the Product BOM.
1.7 "Repair service by ACCELGRAPHICS, Inc.":
ACCELGRAPHICS Inc. shall provide repair service for all Product Field Failures
during the Product Life and the Support Life. Consequently, ACCELGRAPHICS, Inc.
shall be responsible for the repair/replacement of all in-warranty or
out-of-warranty field defective boards returned during this period. In the case
where HP is forced to repair following failure by ACCELGRAPHICS, Inc. to
repair/replace defective boards per the terms of this addendum, such default
being not cured within [* * * *] after written notice from HP, HP may charge
ACCELGRAPHICS, Inc. as defined in paragraph 5 of Exhibit H-2 to cover HP labor
repair cost and inconvenience. From the date of this repair, any future
under-warranty repair for the Product will be performed by HP who will charge
the same to ACCELGRAPHICS, Inc. for each Product repaired.
1.8 "Option for HP repair":
1.8.1 HP may, at its option, at any time, decide to repair the boards himself at
its premises even without failure from ACCELGRAPHICS, Inc.
[* * * * *]
1.8.2 If ACCELGRAPHICS, Inc. is not able to perform the repair or decides to
stop the repair of the boards, HP will perform the repair.
* Repair pricing:
Field Failures under warranty will be charged to ACCELGRAPHICS, Inc. at a fixed
cost of [* *]per repair (labor cost only, materials to be added) including no
more than [* *] no-trouble-found board. If more than [* *] NTF
<PAGE> 31
are found, then no refund will be requested from ACCELGRAPHICS, Inc. for the NTF
boards in excess of [* *]. Repair refund invoicing shall occurs once a month
together with submission by HP of the monthly pareto report.
* Tooling charges will negotiated at this time as following:
- - AccelGraphics Inc. will lend at no charge to HP his own tooling equipment.
- - If HP has to buy tooling equipment, ACCELGRAPHICS, Inc. will pay back tooling
charges to HP in one shot.
SELECTED OPERATING PROCESS:
AT THE DATE OF SIGNATURE OF THIS ADDENDUM, BP HAS DECIDED TO UTILIZE
ACCELGRAPHICS, INC. TO REPAIR FIELD FAILURES. THIS DECISION MAY BE REVERSED AT
ANY TIME DURING THE PRODUCT LIFE WITH [ ] PRIOR NOTICE TO ACCELGRAPHICS,
INC.
Paragraphs 2 and 3, below, covers provisions in the case ACCELGRAPHICS, Inc.
performs the repair. Paragraph 4 states provisions in the case HP performs the
repair as a consequence of exercising Option 1.8 above. Provisions of paragraph
2.10 remain valid in both cases.
2. Required operating processes in the case ACCELGRAPHICS, Inc. performs the
repair
2.1 Manufacturing operation:
ACCELGRAPHICS Inc. shall set one dedicated repair organization to handle repair
service of all Products Field Failures, regardless of their actual manufacturing
plant, with dedicated and identified people, location, stock and repair
equipment and a Spare Part delivery service. In the following section, this
repair operation will be referred to as "Central Repair Facility", or CRF. The
CRF where HP organizations can order services is:
ACCELGRAPHICS, Inc., 1942 Zanker Road, San Jose, CA 95112, United Sates
2.2 Purchase order and acknowledgment:
Each weekly shipment of defective boards from HP to ACCELGRAPHICS, Inc. CRF
shall be accompanied by a Purchase Order for a repair service and the
acknowledgment form. The PO will be faxed or emailed to ACCELGRAPHICS, Inc. CRF
at the time the boards are sent.
Upon receipt of the defective boards to be repaired by ACCELGRAPHICS, Inc. CRF,
ACCELGRAPHICS, Inc. CRF shall send back to HP the acknowledgment form within two
(2) working days. Any discrepancies between the Purchase Order and the receipt
of products for repair by ACCELGRAPHICS, Inc. CRF, will be communicated to HP by
facsimile on the acknowledgment form.
Delivery addresses will be noted on the Purchase Order.
HP will comply with customs regulations when returning defective boards to
ACCELGRAPHICS, Inc. CRF.
Field failures shall not be subject to the RMA process defined in Exhibit H-1.
The RMA process is exclusively used for Non Complying Products.
2.3 Repaired hoard tracking:
For all defective boards, the HP control number is intended to track the
defective boards at individual level at HP and ACCELGRAPHICS, Inc. CRF. HP
control number for each repaired Product shall always take precedence over
ACCELGRAPHICS, Inc.'s manufacturer's serial number or equivalent manufacturing
serial number and must be marked on Products.
Upon receipt of boards from HP, and prior to any other operation on them,
ACCELGRAPHICS, Inc. CRF shall record in it's data base the HP part number, the
accelgraphics, Inc. or HP original revision level, the HP Control numbers and
the HP serial numbers for each board.
<PAGE> 32
This recording shall be done before a maximum of two (2) working days after
receipt of the boards. HP and ACCELGRAPHICS, Inc. are entitled to audit this
recording process at any time. These recordings shall be used as the basis for
invoicing HP or ACCELGRAPHICS, Inc. for the cost of the board upgrades as set
forth is 2.4., below.
HP part number, engineering code and manufacturing date-code labels shall be
placed on the repaired boards.
2.4 Board upgrade:
ACCELGRAPHICS, Inc. and HP shall mutually define on an on-going basis the
"current upgrade matrix" of repaired boards detailing the mandatory board
upgrades on the basis that a repaired board must exhibit the same performance
and bug integrity level than a current production board. The responsibility and
cost of each upgrade shall be defined in the same matrix. At any time,
ACCELGRAPHICS, Inc. CRF shall ship repaired/replaced boards complying with the
current upgrade matrix requirements.
ACCELGRAPHICS, Inc. CRF shall test repaired/replaced boards at the latest test
release level in accordance with the current upgrade matrix.
2.5 Documentation and Reporting:
On a weekly basis, on Monday, ACCELGRAPHICS, Inc. CRF shall send to BP the
complete shipping plan including history and backlog, for all POs related to
board repair or Spare Part orders.
ACCELGRAPHICS, Inc. CRF shall provide HP with monthly reports in pareto format
summarizing the diagnostics results and the components involved for each
part-number. These reports shall include the No Trouble Found ratio as defined
in clause 3.3 below, per board requiring upgrade and board not requiring
upgrade, and the monthly scrap percentage.
ACCELGRAPHICS, Inc. CRF will maintain historical records for each defective
board returned by HIP. All these reports shall be written in a mutually agreed
format. ACCELGRAPHICS, Inc. CRF will include necessary explanations for all
situations failing the provisions of this Exhibit, when any, including adequate
recovery and/or action plan.
2.6 Boards scraps
A board which has been returned by HP for the third time and verified by
ACCELGRAPHICS, Inc. CRF as a defective board each time, will be scrapped by
ACCELGRAPHICS, Inc. CRF at ACCELGRAPHICS, Inc. CRF's expense.
A board which cannot be reasonably repaired due to damage, abuse, misuse and
alteration other than done by ACCELGRAPHICS, Inc. CRF shall be scrapped by
ACCELGRAPHICS, Inc. CRF at HP's expense. ACCELGRAPHICS, Inc. CRF shall keep such
boards available to HP during two (2) months for audit purpose upon HP's
request. ACCELGRAPHICS, Inc. CRF shall contact HP to determine disposition of
materials and reconcile open orders.
Scrapped boards control numbers along with the related order numbers shall be
communicated to HP within two (2) days maximum after boards are scrapped.
2.7 Repair or replace:
ACCELGRAPHICS, Inc. CRF may, at its option, replace the defective board with a
new Product rather than repairing the board, at no extra cost to HP. Whenever
ACCELGRAPHICS, Inc. CRF performs replacements, ACCELGRAPHICS, Inc. CRF shall
supply HIP with a diagnostic of all received defective boards within one (1)
month with the HP part-number. The replaced board shall comply with the current
upgrade matrix requirements as defined in clause 2.4.
2.8 Board shipment:
All Products to be repaired will be shipped by HP to ACCELGRAPHICS, Inc. CRF for
repair at HP's expenses.
<PAGE> 33
All replacement or repaired Products shipped by ACCELGRAPHICS, Inc. CRF to HP
shall be at ACCELGRAPHICS, Inc. CRF's risk and expenses, including
transportation charges.
ACCELGRAPHICS, Inc. CRF shall provide the products, individually packed
according to HP specifications.
ACCELGRAPHICS, Inc. CRF will expedite shipping of all past due orders at
ACCELGRAPHICS, Inc.'s expenses.
2.9 Invoicing/payment:
ACCELGRAPHICS, Inc. CRF shall charge HP as defined in 3.5 and 2.4, once a month.
The invoice shall correspond to the repair and upgrades performed on the boards
shipped to HP. HIP shall pay in Net thirty (30) days after the later of the
receipt of the invoice or the receipt of the boards.
ACCELGRAPHICS, Inc. CRF shall be able at any time to demonstrate upon HP request
the details of the in warranty and out of warranty board upgrade operations
performed on each shipped board.
2.10 Spare Parts:
2.10.1 General conditions
ACCELGRAPHICS, Inc. shall provide HP with Spare Parts for all the Products
object of these addenda during the Product Life and the Support Life of the
Product. These Spare Parts shall comply with the current upgrade matrix
requirements as defined in clause 2.4 above.
On a monthly basis, HP Repair and Support organizations will issue purchase
orders for Spare Parts to ACCELGRAPHICS, Inc. which will deliver them with the
highest priority (see Exhibit D). The maximum lead time for such orders shall
not-exceed [* *].
The price of these Spare Parts will be equal to the current pricing available
for HP.
These Spare Parts will have a warranty of thirty nine (39) months from their
initial shipment from ACCELGRAPHICS, Inc.
Handling of Spare Parts orders, shipment conditions, terms of payment and
quality rules obey the same rules as set forth for normal Product orders (see
Sections G) except as explicitly notified below.
On an exceptional basis, as requested by HP, ACCELGRAPHICS, Inc. shall provide
emergency ("Hotline") same day shipping service for Spare Parts.
2.10.2 Spare Parts Availability during the Support Life:
If during the Support Life, ACCELGRAPHICS, Inc. wishes to discontinue the
production of the Spare Parts, ACCELGRAPHICS, Inc. agrees to provide HP with
[* *]prior written notice of discontinuance.
In this case HP will be given the opportunity to place a Spare Parts "Lifetime
Buy" orders at the [* *] after notice of discontinuance has been given.
ACCELGRAPHICS, Inc. shall deliver this "Lifetime Buy" according to manufacturing
and procurement lead-time conditions at time of manufacturing, and shall invoice
HP based on actual price at time of invoice.
The unit price of these lifetime buy
2.10.3 Forecasts:
Non repaired boards: forecasts for support organization will be included in the
monthly forecasts issued by HP (as set forth in Exhibit D).
Repaired boards: the support organizations will issue monthly forecasts, on a 5
months rolling window, including boards to be returned by HP to ACCELGRAPHICS,
Inc. for repair and repaired boards to be sent by ACCELGRAPHICS, Inc. to HP.
<PAGE> 34
2.11 Spare Components:
"Spare Components" are defined as components belonging to the Bill of Materials
of the Products in conformance with the current Approved Vendor List.
During the Product Life and at any time during the Support Life, ACCELGRAPHICS,
Inc. is responsible for making sure Spare Components are available either on the
market or at ACCELGRAPHICS, Inc. CRF's premises to ensure that ACCELGRAPHICS,
Inc. is able to meet the Repair and Spare Part supply services stated in
sections above.
In the event a component becomes obsolete, ACCELGRAPHICS, Inc. CRF shall take
the initiative of building a lifetime inventory of this component or formally
introduce a suitable substitute through the Engineering Change Notification
process, as described in Appendix 1, subject to approval by HP.
In the case building a lifetime buy is the selected solution, ACCELGRAPHICS,
Inc. shall evaluate the lifetime inventory necessary to meet the requirements of
the Repair and Spare Part supply services stated in sections above for the
remaining Support Life period. For this evaluation, HP shall, under request by
ACCELGRAPHICS, Inc., supply ACCELGRAPHICS, Inc. with its Spare Part forecasted
needs.
The price of these "Life time buy" boards will be [* *] as set in Exhibit B
(which is the estimation of the standard cost with no margin).
2.12 Inventory:
At HP's demand and no more than four (4) times a year, ACCELGRAPHICS, Inc. CRF
will provide HP with a physical inventory of HP property. ACCELGRAPHICS, Inc.
CRF will, within two weeks, provide the required listing including the HP parts
numbers, and the quantities segmented by each Repair and Support organization.
2.13 Repair warranty:
Repaired/replaced Products have the remainder of their original warranty from
their original shipment from ACCELGRAPHICS, Inc. If the repaired/replaced board
continues to be defective with the same root cause, ACCELGRAPHICS, Inc. CRF will
repair or replace it at no cost to HP. There is no implied warranty for all
Products that have been repaired outside warranty.
2.14 HP inventory board upgrade:
HP may, at its option, ship all or part of its inventory of Spare Parts to
ACCELGRAPHICS, Inc. CRF for upgrade in accordance with the current upgrade
matrix requirement. ACCELGRAPHICS, Inc. CRF and HP shall mutually agree upon a
time frame and a turn around time for such upgrade.
The cost of upgrade shall be shared between both parties according to
responsibilities defined in the current upgrade matrix, and invoiced as defined
in clause 2.9.
3. Objectives
3.1 Repair turn around time:
ACCELGRAPHICS, Inc. CRF will repair or replace defective boards within [* *]from
date of receipt by ACCELGRAPHICS, Inc. CRF and make them available at HP's
delivery address specified on the corresponding Purchase Order within an
additional [* *] transit time for HP/SME. The total period of [* *] is defined
as the turn around time. As a provision for setting up the repair process,
during the first 2 months, a [* *] turn around time will be tolerated. In case
ACCELGRAPHICS, Inc. CRF is unable to meet the turn around time, ACCELGRAPHICS,
Inc. CRF shall give HP advanced notice of no less than twenty-four (24) hours
from the shipment due date. This notice will be accompanied by a mutually
acceptable recovery plan, with specific dates.
If the turn around time for a given order exceeds [* *], ACCELGRAPHICS, Inc. CRF
shall replace the concerned boards by new Products, at no extra cost to HP.
<PAGE> 35
In no case shall HP be kept liable for any new or repaired board buffer stock
set at ACCELGRAPHICS, Inc. premises for the purpose of meeting the contractual
turnaround time. If the turn around time objective is not reached consistently,
both parties shall discuss a plan to cure the problem and meet again the turn
around time.
3.2 Non complying Product rate for repaired Products:
For definitions and calculation, see Exhibit G.
NCPR limits:
rate (goal) Upper limit
CPU board: [* *] [* *]
The upper limit is defined as a dock to stock objective.
Excessive NCPR conditions: see Exhibit G.
3.3 "No Trouble Found" boards:
A board is defined as being No Trouble Found if it passes the set of tests at
ACCELGRAPHICS, Inc. CRF, regardless of its upgrade status. The boards coming
from HP Spare Part inventory for upgrade only are excluded from this
calculation.
If the percentage of No Trouble Found boards (called "NTF") calculated on a
monthly basis exceeds [* *], ACCELGRAPHICS, Inc. CRF and HP will make sure a
trouble-shooting method ensuring detection of intermittent failures is used.
If the percentage of NTF consistently stays above [* *] in spite of this,
ACCELGRAPHICS Inc. CRF shall take leadership in organizing a meeting with HP to
determine the causes and may request the latest HIP system at no charge for
problem verification.
3.4 First 30 boards process:
A specific failure analysis is required from ACCELGRAPHICS, Inc. CRF for the
first thirty (30) Field Failures boards sent back to ACCELGRAPHICS, Inc. CRF for
repair. The failure analysis report will contain a component pareto and for each
component a root-cause analysis (design, process, component, failures). The
failure analysis report shall be generated every two weeks and sent to HP
(Vendor Account Manager and SME Repair organization) until the first thirty (30)
boards have been analyzed, repaired and sent back to HP.
3.5 Repair pricing:
Field Failures under warranty are repaired at no cost to HP. Upgrade costs are
invoiced by ACCELGRAPHICS, Inc. CRF according to the Upgrade matrix defined in
section 2.4. Out-of-warranty Field Failures are repaired and a cost, charged to
HP, jointly analyzed and negotiated every year. This cost is not fixed yet.
4. HP repair provisions
This section describes ACCELGRAPHICS, Inc.'s and HP's obligations in the case HP
decides to exercise Option 1.8 to repair the Failed Failures itself
4.1 ACCELGRAPHICS Inc. obligations:
4.1.1 Component supply:
HP shall have the right to purchase components belonging to the board BOM from
ACCELGRAPHICS, Inc. at a price negotiated according to market trends, during the
Product Life. The lead time will be [* *]. However, if the quantities are less
than 20 pieces, ACCELGRAPHICS, Inc. will do its best to meet the [* *] lead
time. In any case, ACCELGRAPHICS, Inc. will inform HIP of a possible product
shortfall due to the component shipments and HP can make the decision to buy the
parts. Minimum orders is US [* *].
Unless otherwise agreed by HP, delivery of components to the repair
organizations has priority over manufacturing of new boards). These components
must comply in form, fit, version with the current AVL at date of purchase.
<PAGE> 36
4.1.2 Test tools:
HP shall have the right to obtain from ACCELGRAPHICS, Inc. all plans, documents,
samples, drawings, software, and other informations necessary for HP to
manufacture its test tools and fixtures.
4.1.3 Communication:
ACCELGRAPHICS, Inc. shall pro-actively communicate to HP any data or change in
its manufacturing process that may affect the HP repair activity.
4.1.4 Spare parts:
Provisions in 2.10 remains valid.
4.1.5 Repair refund:
ACCELGRAPHICS, Inc. shall pay HP within 30 days of reception of an appropriate
invoice covering repair cost refund (see 1.7 and 1.8 above).
4.2 HP obligations:
4.2.1 Part purchase:
Three months before the planned end of the Product Life, HP shall give
ACCELGRAPHICS, Inc. a forecast of its needs for components in order to enable
ACCELGRAPHICS, Inc. to acknowledge favorably any "end of life" component order.
After the Product Life + 3 months, HP will be on its own for its component
purchasing.
4.2.2 Communication and reporting:
On-going reporting: HP shall provide ACCELGRAPHICS, Inc. with monthly reports in
pareto format summarizing the diagnostics results and the components involved in
each failure. These reports shall include the No Trouble Found ratio as defined
in clause 3.3 above, per board requiring upgrade and board not requiring
upgrade, and the monthly scrap percentage. HP will maintain historical records
for each defective board returned.
First 30 boards: for the first 30 field failure boards, a specific failure
analysis will be performed by HP and sent to ACCELGRAPHICS, Inc. This failure
analysis report will contain a component pareto and for each component a
root-cause analysis (design, process, component, failures). The failure analysis
report shall be generated every two weeks and sent to ACCELGRAPHICS, Inc. until
the first 30 boards have been analyzed and repaired.
During the first 3 months, HP will maintain daily/weekly contact with
ACCELGRAPHICS Inc. through 2 contacts (to be defined if this process is
implemented) with the objective of passing to ACCELGRAPHICS, Inc. all repair
informations and ideas that may have a positive effect on ACCELGRAPHICS, Inc.
manufacturing process yield and quality.
5. Out of warranty boards
Out of warranty boards repair will be charged to HP as following:
Labor: [* *] per board
Materials: according to [* *]
<PAGE> 37
EXHIBIT I
ENGINEERING CHANGE PROCEDURE
1. Engineering Change Request Process
ACCELGRAPHICS Inc. will have to notify HP of any product change at least [*
*] weeks before chancre implementation in the product.
Chancre may impact either hardware or software components.
ACCELGRAPHICS, Inc. will ship prototypes samples to HP at least [* *] weeks
before chancre implementation in the product.
ACCELGRAPHICS, Inc. will have to wait for HP Vendor Account Manager
authorization before sending products including the change to any Eligible
Buyer after receiving an order from them.
The engineering date-code of the cards will have to be modified according to the
new chancre and notified to HP.
2. Acceptance criteria
- - Each software engineering chance will have to be backward compatible with
previous hardware product versions.
- - If either hardware or software engineering changes don't pass UP
qualification tests, AccelGraphics, Inc. commits to support HP with the last
qualified product revision (hardware or software) without any additional cost.
3. Roll over risk management
During [* *] after the first shipment of the product including the change
implementation as described above, ACCELGRAPHICS, Inc. will keep in house at HP
charge an inventory of boards which don't include the engineering change (i.e.
boards with previous revision).
The amount of this inventory will be equal to [* *] shipment.
ACCELGRAPHICS Inc. will be able to ship these units or a part of them to any HP
Eligible Buyers in case of problem with the new product revision.
[* *] after the first shipment of modified products, these units will be reused
in the usual orders according to the following process:
- - Alternative 1: if the engineering change is a major hardware bug fix, this
inventory will be [* *].
- - Alternative 2: if the engineering change is part of the current improvement
process, and if HP decides to have these boards upgraded, [* *].
4. Tracking
Upon request from HP, ACCELGRAPHICS will be able to provide HP with the
production data and shift of a board identified with its serial number, and the
list of all other boards produced during the same shift. Serialization data must
be stored by ACCELGRAPHICS during the whole support life of the product (see
Exhibit F)
5. Approved Vendor List
The AVL is a dated and IS09000-registered listing of all parts used in the
design of the Product. For each of these parts, it includes:
(1) ACCELGRAPHICS, Inc. part # (or HP part number when applicable)
(2) The type of part (ex: capacitor)
(3) A description of the part
<PAGE> 38
(4) The package type
(5) A list of Vendors qualified for this part
(6) The Vendor's reference number for the part
(7) The Vendor's stepping version and manufacturing location for all critical
parts (Big MOS, TTL ICs, PC board,...the list of which will be mutually agreed
upon and modifiable during the life of the Product). The AVL must be given a
version number. ACCELGRAPHICS, Inc. is expected to make incoming inspection of
components to ensure that the AVL is respected.
<PAGE> 39
EXHIBIT J
RELATIONSHIP MANAGERS
HP: [* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
SELLER: [* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
[* * * * *]
From an operational and support standpoint, the contacts are:
<TABLE>
<CAPTION>
Function ACCELGRAPHICS, Inc. contact HP contact
- -------- --------------------------- ----------
<S> <C> <C>
Business Management [* * *] [* * *]
Engineering [* * *] [* * *]
Quality control [* * *] [* * *]
Procurement Forecasts [* * *] [* * *]
Marketing [* * *] [* * *]
Lab R&D [* * *] [* * *]
Technical Marketing [* * *] [* * *]
Repair [* * *] [* * *]
Escalation [* * *] [* * *]
[* * *]
</TABLE>
Both AccelGraphics, Inc. and HP relationship managers as defined here
above shall be copied in all written exchanges between HP and AccelGraphics,
Inc. HP and AccelGraphics Inc. will keep each other updated on any
organization change that may affect the contact persons and/or communication
flows.
<PAGE> 40
Amendment 1
Dealer Agreement
Amendment 1 is entered into this ____ day of ______ 1995, by and between
AccelGraphics, Inc., a California corporation ("AccelGraphics"), and Business
Smarts (Dealer). The effective date ("Effective Date") shall be the last date on
which an authorized representative of the Parties signed below. It is an
Amendment to the Dealer Agreement signed February 13, 1995.
Section 1.0 - Removing section from the Dealers original contract
1.1 Sales Reports - Refer to section 4.4 (b) in the original Dealer contract
Section 2-0 - Changing the terms in the contract
2.1 Acceptance and Rejection - Refer to section 8.4 in the original contract.
Change the terms to allow dealer to inspect all products within ten (10) working
days of receipt of that product otherwise, product will be deemed accepted.
2.2 Reschedule - Refer to section 9.1 in the original contract. Dealer may
reschedule an order without cancellation fee by delivering written notice to
AccelGraphics at least fourteen (14) days before the scheduled shipment date
provided that (i) the rescheduled delivery date is not more than ninety (90)
days after the original delivery date and (ii) the rescheduled order cannot be
rescheduled again or canceled.
2.3 Cancellation - Refer to section 9.2 in the original contract. Dealer may
cancel an order without a cancellation fee by delivering notice to AccelGraphics
at least fourteen (14) days before the shipment date. Dealer agrees to pay
AccelGraphics a cancellation charge of twenty-five percent (25%) of the net
price of each item canceled, for any order canceled with less than fourteen (14)
days notice to AccelGraphics.
IN WITNESS WHEREOF, the parties' authorized representatives have executed this
Agreement providing the Reseller shall not sell, directly or indirectly, and
Product by Mail.
AccelGraphics, INC. Business Smarts
By: /s/ Nancy E. Bush By: /s/ Bob Banjac
------------------------------ --------------------------------
Print Name: Nancy E. Bush Print Name: Bob Banjack
---------------------- -------------------------
Title: CFO Title: Mkt Dir.
--------------------------- ------------------------------
Date: 3/29/95 Date: 3/9/95
---------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.11
TURNKEY AGREEMENT
This agreement is made between MAT Technologies Ltd. No. 101, Estate
Centre Bldg., 19 Dai Cheong Street, Tai Po Industrial Estate, N.T., Hong Kong
and The Customer, whose name and address is set forth below:
AccelGraphics, Inc.
1942 Zanker Road
San Jose, CA 95112
U.S.A.
WHEREAS:
The Customer agrees to purchase from MAT and MAT hereby agrees to sell
and deliver to The Customer, various assemblies and subassemblies, that are to
be released and acknowledged respectively by purchase order, in accordance with
the terms and conditions set forth below.
1.0 Term
The term of this Agreement shall continue in full force and
effect for a period of twelve (12) months following the
close-out of the last outstanding Customer Purchase Order.
2.0 Order Requirements
The Customer will individually release the procurement,
fabrication, and test of each assembly/subassembly by purchase
order which will embody specifies as to configuration and
acceptance criteria along with special test equipment and
tooling.
2.1 Order Quantities, Pricing, and Schedules (as list in
Exhibit A)
The pricing of each assembly/subassembly shall be
calculated on the total quantity to be procured over
a [* * * *] period in accordance with a negotiated
and mutually acceptable quantity/price schedule.
Purchase orders must reflect full contract volume of
[* * * *] units in first year.
2.2 Order Forecast Variations
Orders released by The Customer will each contain
quantities for the next [* * * *] period with a firm
delivery schedule for [* * * *] presented in the form
of a rolling [* * * *] forecast (The "Forecast"). The
Forecast will be updated by change order notice prior
to the fifteenth (15th) of each month to permit the
extension of The Forecast by [* * * *] and provide
schedule variations to satisfy The Customer's
requirement.
<PAGE> 2
Such variations may be in the nature of increases or
decreases commencing with the [* * * *].
Should a schedule increase be required in months [* *
* *] commencing from date of notice of change, such
schedule increase shall be limited as follows:
The increased amounts for month [* * * *] may be up
to [* * * *] of the original scheduled amounts
respectively.
Should a schedule reduction be required in months [*
* * *] commencing from date of notice of change, such
schedule reduction shall be limited as Follow:
The total scheduled amounts for months [* * *
*] may be rescheduled for delivery during months [*
* * *]; and additional [* * * *] period. However, in
no way may the number of units be less than [* * * *]
of the amount previously scheduled to be delivered
for that month.
3.0 Terms and Conditions
3.1 Changes in Specifications
The Customer may, during the performance of this
contract, request changes in the specifications of
the Products. Such changes shall be implemented upon
mutual agreement which shall be reduced to writing
and signed by both parties. If any such change causes
an increase or decrease in the price of, or the time
required for, the performance of any part of the work
under this contract, an equitable adjustment shall be
made in the contract price or delivery schedule, or
both, and shall be modified to reflect such equitable
adjustment. MAT will not be obligated to proceed with
the contract as changed until mutual agreement has
been reached, reduced to writing and signed by both
parties, but MAT will make its best efforts to comply
with requested changes pending mutual agreement, in
writing, to be signed by both parties. It is strongly
recommended that the customer provide a [* * * *]
supply of those components added to an assembly as
part of an immediately effective ECO. In all cases,
the customer is responsible for obsolescence costs
related to an ECO; however, MAT will make every
effort to minimize these costs.
3.2 Customer Supplied Components
Should The Customer elect to supply any components to
MAT, and MAT agree to such action, such components
including provision for failure parts, will be
delivered to MAT not later than [* * * *] prior to
each scheduled delivery date. Should The Customer be
unable to meet such
-2-
<PAGE> 3
delivery requirements, MAT may at its option, ship
Products to The Customer absent the supplied pans on
or after [* * * *] from the scheduled delivery date.
Under these circumstances, MAT will give written
notification to The Customer prior to actual
shipment.
3.3 Acceptance Criteria
The basic acceptance criteria shall be conformance to
drawings, specifications, and test criteria as
specified by each Purchase Order, and will satisfy
the intent and objectives of The Customer's
workmanship and quality standards.
3.31 Alternate Sources
MAT will, on a continuing basis, perform
value analyses of material and labor content
in the interest of improving quality and
reducing cost to The Customer. Alternate
material sources, and if any, off-load
assembly recommendations, as determined
feasible by MAT will require the written
approval of The Customer prior to
implementation.
3.32 Acceptance
The Customer shall inspect all Products
promptly upon receipt thereof at the
receiving destination and may reject any
goods which fail to meet the specifications
as outlined in MAT's Quotation. Units not
rejected by written notification to MAT
within ten (10) days of receipt at The
Customer facilities shall be deemed to have
been accepted.
3.33 Rejection
Rejection goods shall be returned to MAT,
freight prepaid, within ten (10) days of
receipt of a Return Materials Authorization
(RMA) from MAT. MAT will issue an RMA within
5 working days of acknowledged rejects. No
later than thirty (30) days after receipt by
MAT of rejected goods, MAT shall, at its
expense, either repair or replace said
properly rejected goods. MAT will prepay
transportation charges back to The Customer.
3.4 Shipment
Delivery will be FOB destination. All shipments
hereunder will be made in MAT standard shipping
packages to The Customer at The Customer's address
set forth below:
-3-
<PAGE> 4
Accel Graphics, Inc.
1942 Zanker Road
San Jose, CA 95112
U.S.A.
3.5 Payment
Payment terms for products is [* * * *]. Payment
terms for toolings are as follows :
- [* * * *] upon order confirmation.
- [* * * *] at completion of molds.
- [* * * *] after sample acceptance.
3.6 Taxes
The Customer shall bear all applicable U.S. federal,
state, municipal, and other governmental taxes (such
as sales, use, or similar charges) and all personal
property taxes assessable on the Products. The
Customer shall in no event be liable for any taxes
levied on MAT based upon its income or any taxes or
duties levied by a U.S. or non-U, S. governmental
agency.
3.7 Warranty
MAT warrants that Products delivered by MAT to The
Customer pursuant to this Agreement shall be free
from defects in material and workmanship and shall
successfully meet all specifications and test
criteria as outlined in MAT Quotation. This warranty
does not extend to The Customer supplied components.
The warranty shall be effective for a period of [* *
* *] after acceptance. MAT's obligation under this
warranty is limited to replacing or repairing, if
can't be repaired or replaced then refund, any of the
Products that are found to be defective during the
warranty period for which The Customer will give MAT
specific written notification of defect.
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EITHER EXPRESSED OR IMPLIED.
3.8 Limitation of Liability
Any provision herein to the contrary not
withstanding, in no event shall MAT be liable for
indirect, incidental, or consequential damages, and
in no event shall the liability of MAT arising in
connection with any products sold hereunder, exceed
the actual amount paid by The Customer to MAT for
Products delivered.
-4-
<PAGE> 5
3.9 Assignment
The rights of The Customer or MAT under this
Agreement may not be assigned in whole or in part by
operation of law or otherwise, without the prior
express written consent of the other, which consent
shall not be unreasonably withheld. However, either
party may assign this Agreement and its rights
hereunder, without the consent of the other, to
successors as a result of mergers and acquisitions.
Any attempted assignment of any rights, duties, or
obligations hereunder without such consent shall be
voided.
3.10 Force Majeure
If the performance of this Agreement or of any
obligation hereunder is prevented, restricted, or
interfered with by reason of fire, flood, or other
casualty or accident, labor disputes, war or other
violence, any law, order, proclamation, regulation,
ordinance, demand or requirement of any governmental
agency or intergovernmental body; or any other act or
condition whatsoever beyond the reasonable control of
the parties hereto, the party so affected shall be
excused from such performance to the extent of such
prevention, restriction, or interference.
4.0 Confidential Information
It is agreed that all information supplied by The Customer
shall be regarded as proprietary information owned by The
Customer. MAT is granted No rights or licenses with respect to
such customer proprietary information except provided herein.
Both parties agree to receive and hold each other's
proprietary information in confidence and to exert the same
effort to prevent disclosure thereof as they would for their
own proprietary information. The obligations of this paragraph
shall, however, impose no obligation upon either party with
respect to any portion of the received information (a) which
was known to the receiving party prior to its first receipt
from the other party; (b) which is now or shall hereafter,
through no act or failure to act upon the part of the
receiving party become generally known; (c) which is hereafter
furnished by a third party and without restriction on
disclosure; or (d) which is independently developed by either
party, provided the person or persons developing same have not
had access to the same information as received from the other
party.
5.0 Termination
5.1 Default
Failure on the part of either party to satisfy its
duties or obligations in accordance with the terms of
this Agreement, shall constitute a default if not
cured within [* * * *] after written notice of such
breach.
-5-
<PAGE> 6
5.2 Termination for Default
In the event of termination brought about by default
on the part of The Customer, MAT will negotiate in
good faith to agree on reasonable attempts to restock
or utilize common material. Such material will be
sent to The Customer and The Customer agrees to be
billed at [* * * *], along with [* * * *], as
determined by MAT purchase documentation, to The
Customer as it is received by MAT and billed by MAT
to The Customer [* * * *].
5.3 Termination for Insolvency
Either party may terminate this Agreement on [* * *
*] written notice if the other party is insolvent or
has made any assignment by operation of law or
otherwise of this Agreement or any of its rights
hereunder for the benefit of creditors. In the event
of termination, all marks, design, any data,
drawings, documents, copy rights, trademark, patterns
or other intellectual property right relating to the
products must be returned within 30 days to
AccelGraphics Inc.
6.0 Miscellaneous
6.1 Entire Agreement
This Agreement supersedes and cancels all prior
agreements, if any, between the parties and shall not
be amended, altered, or changed except by written
agreement signed by both parties.
6.2 Titles and Subtitles
The titles and subtitles used in this Agreement are
for convenience only and are not a part of this
Agreement and do not in any way limit or amplify the
terms and provisions of this Agreement.
6.3 Notices
All notices and other communications hereunder shall
be in writing, to the parties hereto at their
respective addresses specified herein, subject to the
right of either party to change its address by
written notice.
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<PAGE> 7
MAT address for notice is:
Managing Director
MAT Technologies Ltd.
No. 101, Estate Centre Bldg.
19 Dai Cheong Street
Tai Po Ind. Estate
N.T., Hong Kong.
6.4 Use of Standard Purchase Order
The Customer will use its standard purchase order
form to release items, quantities, prices, schedules,
change notices, specifications or other notice
provided for hereunder, said Purchase Orders will be
governed by the terms and conditions of this
Agreement to the extent that such terms and
conditions are inconsistent with those set forth in
this Agreement.
6.5 Governing Law
This Agreement shall be governed in all respects by
the laws of Hong Kong.
6.6 No Waiver
No waiver of any provision of this Agreement shall be
effective except by written agreement signed by both
parties. No waiver of any breach of any provision
thereof shall constitute a waiver of any subsequent
breach of the same or of any other provision thereof.
6.7 Express of Suite
If suit is commenced to enforce the performance of
any part of this Agreement, including without
limitation any order or release made hereunder, the
prevailing party shall be paid by the other party
reasonable attorneys' fees and expenses.
6.8 Counterparts
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, The parties have executed this Agreement as of the
day and year first written below.
MAT Technologies Ltd. THE CUSTOMER
By: /s/ MAT Technologies Ltd. By: /s/ Jeffrey W. Dunn
--------------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Date: February 5, 1996 Date: February 5, 1996
------------------------------- ------------------------------
Name: AccelGraphics, Inc.
Address: 1942 Zanker Road
San Jose, Calif. 95112
Telephones: [* * * *]
Facsimile: [* * * *]
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<PAGE> 9
EXHIBIT A
The cost breakdown of unit price of AccelGraphics Panther Card based on
contract volume of [* * * *] units per year.
Estimated Material Cost (exclude P/N555-0800-01) [* * * *]
Scrap Allowance [* * * *] [* * * *]
Material Overhead Cost [* * * *] [* * * *]
Administration Cost [* * * *] [* * * *]
Labor Cost for board assembly [* * * *]
ICT Testing [* * * *]
Functional Testing [* * * *]
Labor Cost for packaging [* * * *]
Total Cost [* * * *]
Profit [* * * *]
Total Amount [* * * *]
Remarks :
1. Assume the total functional testing time is around 10 minutes and the
testing yield is 99% or above, and the testing time for products is
less than 1 minutes, and the testing yield is 97% above. All the
functional testers will be provided by AccelGraphics.
2. Delivery assemblies will be manufactured to MAT workmanship standard
(IPC-A-610 Class II) and In-circuit testing.
a) The In-circuit test will be performed on a HP3065 In-circuit
tester.
b) In-circuit test program and fixture will be developed by us in
our facility. AccelGraphics must approve test program results
prior to production use.
3. As our general practice, AccelGraphics has to absorb all the [* * * *]
buy from vendors.
4. This quote contains costing estimates of components below which can be
extremely volatile in terms of price and delivery MAT reserves the
fight to adjust price and lead times of the assemblies quotes herein
should any component cost rise greater than [* * * *] or lead time
lengthen more than [* * * *]. The overall material cost and the lead
time will be reviewed by The Customer and MAT quarterly.
<PAGE> 10
<TABLE>
<CAPTION>
No.
U/P (US$) Per Unit Supplier
--------- -------- --------
<S> <C> <C> <C> <C>
4.1 PCB (P/N 225-0105-01) [* * *] 1 [* * *]
4.2 IC-VRAM 256K X 16 [* * *] 4 [* * *]
4.3 IC DRAM 1 MEG X 16 [* * *] 1 [* * *]
4.4 IC-VIP TVP3026 [* * *] 1 [* * *]
4.5 CABLE [* * *] 1 [* * *]
4.6 SHIPPING CONTAINER [* * *] 1 [* * *]
4.7 CONN-15POS RT ANGLE [* * *] 1 [* * *]
(520-0270-01)
4.8 CONN-RT ANGLE 15POS [* * *] 1 [* * *]
(520-0277-01)
4.9 HEAT SINK-1.5X1.5XO.4 W/ADH [* * *] 1 [* * *]
4.10 IC-OCTAL BUS EXCHANGE SWITCHES [* * *] 1 [* * *]
(555-0804-01)
4.11 IC-REGULATOR-MIC29300 [* * *] 1 [* * *]
4.12 IC-REGULATOR-MIC29150 [* * *] 1 [* * *]
4.13 64K X 8 EPROMSOCKET [* * *] 1 [* * *]
4.14 PALCE 16V8-7 [* * *] 1 [* * *]
</TABLE>
5. IC-3D Processor will be consigned by AccelGraphics, and this quote does
not include the first five items which mentioned on your BOM (P/N 125-,
340-, 345-, 345- & 546-0244-02).
<PAGE> 1
EXHIBIT 10.12
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT ("Agreement") is made and entered into
as of the Effective Date, by and between 3Dlabs Inc. ("3Dlabs") with principal
offices at 2010 North First Street, Suite 403, San Jose, California 95131, USA
and AccelGraphics, Inc. ("Licensee"), a company with principal offices at 1942
Zanker Rd., San Jose, California 95112.
RECITALS
A. 3Dlabs is the owner of, or has acquired rights to, the
Software Products and the Documentation (as defined below); and
B. 3Dlabs desires to grant to Licensee and Licensee desires to
obtain from 3Dlabs a non-exclusive license to use the Software Products and
Documentation on the terms and conditions of the Agreement;
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. DEFINITIONS.
1.1 "Software Products" shall mean the computer programs
identified on Exhibit A to this Agreement that become subject to this Agreement
as set forth in Section 2 below, together with any subsequent error corrections
of updates supplied to Licensee by 3Dlabs pursuant to this Agreement.
1.2 "Derivative Software Products" shall mean computer
programs in machine readable binary or source code format developed or otherwise
acquired by Licensee which are a modification of enhancement to, derived from or
based upon Software Products.
1.3 "Documentation" shall mean all manuals, user
documentation, and other related materials pertaining to the Software Products
that 3Dlabs provides to Licensee for use in connection with the Software
Products.
1.4 "Effective Date" shall mean the last date set forth
opposite the parties signature lines.
1.5 "3Dlabs Chip Products" shall mean the 3Dlabs
graphics accelerator products listed on Exhibit A.
2. INCLUSION OF SOFTWARE PRODUCTS UNDER THE AGREEMENT.
2.1 Binary Format. Upon Licensee's purchase of any 3Dlabs Chip
Products, the executable binary format Software Products listed in Exhibit A for
such 3Dlabs Chip Products shall become "Software Products" for purposes of this
License Agreement.
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<PAGE> 2
2.2 Source Code Format. Upon Licensee's purchase of any 3Dlabs
Chip Product, Licensee may place an order with 3Dlabs for one or more of the
source code Software Products listed in Exhibit A for such 3Dlabs Chip Product.
Licensee's order shall include payment of the license fee for such source code
as specified in Exhibit A. Upon 3Dlabs' acceptance of such order, such source
code shall become "Software Products" for purposes of this Agreement.
2.3 Modification of Software Products. The parties may amend
Exhibit A from time to time in writing. In addition (a) if 3Dlabs discontinues
any 3Dlabs Chip Product or Software Products listed on Exhibit A, then 3Dlabs
may modify Exhibit A to delete such Products, and (b) if Licensee purchases one
or more new 3Dlabs graphics accelerator products from 3Dlabs, then 3Dlabs may
modify Exhibit A to include such products as 3Dlabs Chip Products under Exhibit
A and to add software products designed for use with such 3Dlabs Chip Products
as "Software Products" under Exhibit A.
3. GRANT OF RIGHTS. From the Effective Date and as Software
Products are added to this Agreement under Section 2 above, until terminated in
accordance with the terms of this Agreement:
3.1 Binary Format. 3Dlabs hereby grants, and Licensee hereby
accepts, subject to the terms and conditions of this Agreement, a non-exclusive
license to reproduce, distribute, export, upgrade and sublicense others to use
the binary format Software Products (the "Binary Software Products") and the
related Documentation solely for use with 3Dlabs Chip Products purchased by
Licensee from 3Dlabs.
Notwithstanding Licensee's right to sublicense the Binary
Software Products to others for use with the 3Dlabs Chip Products, Licensee
shall have no right to sublicense or authorize parties to reproduce, copy or
otherwise manufacture the Binary Software Products, without 3Dlabs' prior
written permission. Licensee agrees not to attempt to modify, reverse engineer,
disassemble, decompile or trace the execution of the Binary Software products,
or of any portion thereof.
3.2 Source Code Format.
3.2.1 Drivers Source Code. 3Dlabs hereby grants
and Licensee hereby accepts a nonexclusive, nontransferable license to use and
modify the source code for drivers Software Products solely for the purpose of
developing Derivative Software Products for use with 3Dlabs Chip Products
purchased by Licensee from 3Dlabs. Licensee shall have no right to disclose,
sub-license, export, sell or otherwise distribute the Software Products,
Derivative Software Products or any portion thereof in source code format nor
shall Licensee authorize other parties to market, reproduce, have reproduced or
otherwise manufacture the Software products or Derivative Software Products in
source code format.
ANY LICENSE TO USE THE SOURCE CODE OF A DRIVERS SOFTWARE PRODUCT
CONTAINING MICROSOFT CORPORATION'S SOFTWARE IS SUBJECT TO LICENSEE HAVING
PHYSICAL POSSESSION OF AN ORIGINAL MICROSOFT
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<PAGE> 3
SOFTWARE LICENSE FOR THE APPLICABLE MICROSOFT VERSION AT ALL TIMES DURING THE
USE THEREOF. LICENSEE SHALL HOLD 3DLABS HARMLESS FROM ANY LOSS, LIABILITY AND/OR
SETTLEMENT COSTS (INCLUDING REASONABLE ATTORNEYS' FEES) RESULTING FROM ANY CLAIM
AGAINST 3DLABS RELATED TO LICENSEE'S FAILURE TO HAVE SUCH A LICENSE DURING
LICENSEE'S USE OF SUCH SOFTWARE.
4. DELIVERY.
4.1 Binary Software Products. After the Effective Date, 3Dlabs
shall deliver to Licensee a master copy of the Binary Software Products licensed
under this Agreement for use with such 3Dlabs Chip Product, in object code
format and applicable Documentation. 3Dlabs shall deliver the foregoing in
electronic files or disk format, at 3Dlabs' option.
4.2 Source Software Products. After 3Dlabs' receipt of payment
and acceptance of Licensee's order for Software Products in source code format,
as set forth in Section 2 above, 3Dlabs shall deliver to licensee the source
code for the applicable Software Products, together with related Documentation.
3Dlabs shall deliver foregoing in electronic files or disk format, at 3Dlabs'
option.
5. MODIFICATIONS.
5.1 Error Corrections and Updates. 3Dlabs will provide
Licensee with error corrections, bug fixes, patches or other updates to each
Software Product in object code format to the extent available in accordance
with 3Dlabs' release schedule for a period of ninety (90) days from the date of
3Dlabs' delivery of the original Software Product(s) under this Agreement.
5.2 Modifications by 3Dlabs. 3Dlabs shall be under no
obligation to make modifications that may be required for Licensee-specific
hardware, firmware, software, or other requirements. All error corrections, bug
fixes, patches, updates or other modifications to the Software Products or
Documentation made by 3Dlabs or its suppliers shall be the sole property of
3Dlabs or of its suppliers, or both.
5.3 Modifications by Licensee. Licensee shall promptly provide
to 3Dlabs all error corrections, bug fixes, patches, updates or other
modifications to the Software Products or Documentation made by Licensee or by
Licensee's sublicensees and hereby grants to 3Dlabs a limited worldwide,
non-royalty bearing license to use, modify, enhance, edit, reformat, rewrite,
copy, reissue and create derivative works of, sublicense and distribute such
modifications, provided that 3Dlabs shall sublicense such modifications under
terms that are no less restrictive than 3D/labs employs for its similar
products.
6. LICENSE FEES AND PAYMENT.
6.1 License Fee. In consideration of the license rights
granted in Section 3 above, Licensee shall pay the License fees or other
consideration for the Software Products and Documentation as set forth on
Exhibit A to this Agreement.
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<PAGE> 4
6.2 Taxes and Other Charges. Licensee shall be responsible for
paying all (i) sales, use, excise, value-added or other tax or governmental
charges imposed on the licensing or use of the Software Products, Derivative
Software Products and Documentation (ii) freight, insurance and installation
charges, and (iii) import or export duties or like charges.
7. DERIVATIVE SOFTWARE PRODUCTS.
7.1 Title to Software Products Incorporated in Derivative
Software Products. Title to and ownership of any portion of the Software
Products incorporated into a Derivative Software Product shall at all times
remain with 3Dlabs or its supplier, or both, and Licensee shall not have any
title or ownership interest therein.
7.2 Maintenance of Derivative Software Products. 3Dlabs shall
not be required to maintain or otherwise repair any Derivative Software
Products. Any assistance in repairing errors or defects in the Derivative
Software Products which may be provided by 3Dlabs, in its sole discretion, shall
be subject to the terms of a separate agreement under which Licensee shall pay
3Dlabs in accordance with 3Dlabs' then-current charges for such services.
7.3 Products Developed by 3Dlabs. Nothing contained in this
Agreement shall be construed to limit 3Dlabs' rights to modify the Software
Products or to develop other Products which are similar to or offer the same or
similar improvements as Derivative Software Products developed by Licensee.
8. PROTECTION OF SOFTWARE PRODUCTS.
8.1 Proprietary Notices. Licensee agrees not to remove,
obliterate, or cancel from view any copyright, trademark, confidentiality or
other proprietary notice or mark appearing on any of the Software Products or on
output generated by the Software Products and to reproduce and include the same
on each copy of the Software Products and Derivative Software Products.
8.2 Ownership and Protection of Software Products. Licensee
acknowledges that all copies of the Software Products in any form provided by
3Dlabs or made by Licensee are the sole property of 3Dlabs or its suppliers, or
both. Licensee shall not have any right, title or interest in or to any Software
Products, or copies thereof except as expressly provided in this Agreement, and
further shall secure and protect all Software Products, Derivative Software
Products and Documentation consistent with maintenance of 3Dlabs' proprietary
rights therein.
8.3 Copies. Licensee shall not copy the source code of the
Software Products, except that Licensee may make one copy of the source code
solely for archival or backup purpose and may make copies of the source code
solely for use by Licensee's employees who have a need to use such source code
for the purposes authorized under this agreement. All source code of the
Software Products shall remain on Licensee's business premises.
8.4 Mark Ownership. Nothing contained in this Agreement shall
be construed as conferring any license or right with respect to any trademark,
trade name, brand name, or the corporate name of 3Dlabs, or any of 3Dlabs'
suppliers.
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<PAGE> 5
9. CONFIDENTIALITY.
9.1 Maintenance of Confidential Information. Licensee
acknowledges that the Software Products and Documentation contain valuable
proprietary information and trade secrets of 3Dlabs or its suppliers, or both,
and Licensee will not release, disclose or otherwise permit access to such
confidential information or use the information in such a way that other parties
can gain access to such information. In particular, Licensee shall not disclose
or cause to be disclosed the Software Products code, documentation, or other
information contained in the source code to any third party without the prior
written consent of 3Dlabs and, where applicable, 3Dlabs' suppliers. 3Dlabs and
Licensee agree to mark written materials as "Confidential" if they are to be
treated as confidential in nature. Oral communications that are confidential in
nature will be identified as such before, during or immediately after the
communication. Licensee warrants that all those individuals having access to the
Software Products under this Agreement will observe and perform the obligations
in this Agreement with respect to confidential information.
9.2 Injunctive Relief. Licensee acknowledges that the
unauthorized use, transfer, sublicensing or disclosure of the Software Products,
Derivative Software Products, Documentation or copies thereof may cause
irreparable injury to 3Dlabs, and under such circumstances 3Dlabs shall be
entitled to equitable relief, including, but not limited to, preliminary and
permanent injunctive relief, and Licensee waives any requirements that a bond be
posted.
10. LIMITED WARRANTY; INFRINGEMENT. 3Dlabs warrants to Licensee
that as of the date of this Agreement it has no knowledge that the Software
Products or Documentation infringe or otherwise make unauthorized use of any
copyright, trademark, trade secret or proprietary right of any third party.
10.1 Indemnification. 3Dlabs shall at its sole option, either
reimburse Licensee for the cost of defense, or defend a suit or proceeding
brought against Licensee, but only to the extent such suit or proceeding is
based on a claim that the Software Product, solely as furnished by 3Dlabs to
Licensee under this Contract, constitutes direct infringement of any United
States trademark, copyright or patent and 3Dlabs shall pay, or at its sole
option, reimburse Licensee for damages and cost finally awarded therein against
Licensee with respect to such matter, provided that Licensee promptly informs
and furnishes 3Dlabs with a copy of each communication, notice or other action
relating to the alleged infringement and provides to 3Dlabs all authority,
information and assistance necessary to settle, compromise or litigate such suit
or proceeding. The failure of Licensee to provide (i) prompt notice of any
communication asserting alleged infringement and (ii) the exclusive ability to
control the defense concerning such alleged infringement, shall relieve 3Dlabs
of its indemnity Obligations hereunder with respect to such asserted claim.
Following notice of a claim or of a threatened or actual suit, 3Dlabs may at its
expense, without obligation to do so, at its sole option, (i) procure for
Licensee the right to continue to use the Software Product as furnished, or (ii)
replace or modify the Software Product to make it non-infringing, or (iii) grant
Licensee a credit for the Software Product as depreciated and accept its return.
10.2 3Dlabs shall not be obligated to defend or be liable for
costs and damages if the infringement arises out of; (i) use or combination of
the Software Product with software or
-5-
<PAGE> 6
hardware not provided by 3Dlabs even if such combination conforms to the
specified or advertised use of the hardware products, (ii) use of other than the
latest release of Product made available to Buyer by Seller, if such
infringement would have been avoided by the use of such release of Product,
(iii) a modification of the Software Product made by or on behalf of Licensee,
(iv) use of the Software Product, after receiving notice, or having reason to
believe, that the Software Product may infringe a trademark, patent or copyright
of a third party.
10.3 THE FOREGOING STATES THE EXCLUSIVE REMEDY OF LICENSEE AND
THE ENTIRE LIABILITY OF 3DLABS WITH RESPECT TO INFRINGEMENT OF ANY TRADEMARK,
COPYRIGHT OR PATENT BY THE SOFTWARE PRODUCTS AND 3DLABS SHALL HAVE NO LIABILITY
WITH RESPECT TO ANY OTHER PROPRIETARY RIGHTS.
11. DISCLAIMER AND LIMITATION OF LIABILITY.
11.1 Disclaimer of Warranties. THE SOFTWARE PRODUCTS AND
DOCUMENTATION AND ANY AND ALL UPDATES AN D MODIFICATIONS TO THE SAME ARE
LICENSED "AS IS" AND THE WARRANTY PROVIDED IN SECTION 10 ABOVE IS THE SOLE AND
EXCLUSIVE WARRANTY OFFERED BY 3DLABS. 3DLABS DOES NOT REPRESENT OR WARRANT THAT
ALL ERRORS IN THE SOFTWARE PRODUCTS OR DOCUMENTATION WILL BE CORRECTED OR THAT
THE SOFTWARE PRODUCTS WILL RUN ERROR FREE. THERE ARE NO OTHER WARRANTIES
RESPECTING THE SOFTWARE PRODUCTS, DOCUMENTATION OR SERVICES PROVIDED UNDER THIS
AGREEMENT, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY
OF DESIGN, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, EVEN IF 3DLABS
HAS BEEN INFORMED OF SUCH PURPOSE. NO AGENT OF 3DLABS IS AUTHORIZED TO ALTER OR
EXCEED THE WARRANTY OBLIGATIONS OF 3DLABS AS SET FORTH IN THIS AGREEMENT.
11.2 Limitation of Remedies and Liability. 3DLABS SHALL NOT BE
LIABLE TO LICENSEE OR TO ANY OF LICENSEE'S SUBLICENSEES, CUSTOMERS, OR END-USERS
FOR ANY LOSS OF PROFIT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE LICENSING OR USE OF THE
SOFTWARE PRODUCTS, DERIVATIVE SOFTWARE PRODUCTS OR DOCUMENTATION OR FOR ANY
ERROR OR DEFECT IN THE SOFTWARE PRODUCTS OR DOCUMENTATION. Notwithstanding
Section 10 (Limited Warranty, Infringement) the maximum liability of 3Dlabs
arising out of or in connection with license, use or other employment of any
Software Product delivered to Licensee under this Agreement, whether such
liability arises from any claim based on breach or repudiation of contract,
warranty, tort or otherwise, shall in no case exceed the actual price paid to
3Dlabs by Licensee for the Software Product whose license, use, or other
employment gives rise to the liability.
12. LICENSEE'S INDEMNIFICATION. Licensee shall indemnify 3Dlabs
and its suppliers and hold them harmless from any and all liabilities, claims,
costs, losses, and expenses including, but not limited to, reasonable attorneys'
fees and costs of suit incurred by 3Dlabs or its
-6-
<PAGE> 7
suppliers, or both, arising out of or relating to Licensee's misuse,
modification, upgrade, additions, alteration, sale, marketing, reproduction,
sublicensing or other distribution of the Software Products or Derivative
Software Products.
13. TERM OF AGREEMENT. This Agreement shall be effective on the
Effective Date and shall continue in effect until terminated in accordance with
the terms and conditions of Section 14.
14. DEFAULT AND TERMINATION.
14.1 Events of Default. Either party may terminate this
Agreement for material breach by providing thirty (30) days written notice to
the breaching party, unless the breach is corrected during such thirty (30) day
period. Material breach on the pan of Licensee shall include, but not be limited
to, filing a petition to declare such party insolvent or bankrupt which is not
dismissed within thirty (30) days; making an assignment or other arrangement for
the benefit of creditors, or being dissolved or liquidated.
14.2 Termination by 3Dlabs. 3Dlabs may terminate this
Agreement as to any Software Product, effective upon termination of 3Dlabs'
right with respect to such Software Product.
14.3 Obligations on Expiration or Termination. Upon
expiration or termination of this Agreement, all rights granted by this
Agreement shall revert to 3Dlabs and Licensee shall cease and desist all use of
the Software Products and Documentation. Licensee shall destroy or deliver to
3Dlabs within three (3) days of termination all full or partial copies of the
Software Products and Documentation in Licensee's possession or under its
control, other than those properly distributed by Licensee prior to termination,
and will warrant to 3Dlabs such destruction or delivery. Licensee's failure to
comply with the obligations of this Section 14.3 will constitute unauthorized
use of the Software Products and Documentation, entitling 3Dlabs to equitable
relief under Section 9.2 above.
14.4 No Liability. Neither party shall be liable to the
other for terminating this Agreement in accordance with its terms.
14.5 Survival. The following provisions of this Agreement
shall survive its termination or expiration: Sections 6 (License fees and
payment), 7 (Derivative Software Products), 8 (Protection of Software Products),
9 (Confidentiality), 10 (Limited Warranty, Infringement), 11 (Disclaimer and
Limitation of Liability), 12 (Licensee's Indemnity), and 14 through 20 and such
other provisions which, from their context in this Agreement, are intended to
survive its termination or expiration.
15. NOTICES. All notices, authorizations, and requests in connection
with this Agreement shall be deemed given (i) five days after being deposited in
the mail, postage prepaid, certified, or registered, return receipt requested,
or (ii) one day after being sent by overnight courier, charges prepaid, with
confirming fax; and addressed as first set forth above or to such
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<PAGE> 8
other address as the party to receive the notice or request so designates by
written notice to the other.
16. NONASSIGNABILITY. Licensee shall not assign or transfer this
Agreement or all or any part of its rights hereunder, by operation of law or
otherwise, without the prior written consent of 3Dlabs. Any unauthorized
assignment or transfer shall be null and void and shall constitute a default,
entitling 3Dlabs to terminate this Agreement under Section 14 above. This
Agreement shall inure to the benefit of and be binding upon any permitted
successor or assign.
17. GOVERNING LAW JURISDICTION AND VENUE. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California. The California state courts of Santa Clara County,
California (or, if there is exclusive federal jurisdiction, the United States
District Court for the Northern District of California) shall have exclusive
jurisdiction and venue over any dispute arising out of or relating to this
Agreement, and Licensee hereby consents to the jurisdiction and venue or such
courts. Licensee shall file any action arising out of or relating to this
Agreement on the appropriate court within two (2) years from the date that such
cause of action accrues.
18. EXPORT REQUIREMENTS. The Software Products, Derivative Software
Products, Documentation and all related technical information or materials are
subject to export controls and are licensable under the U.S. Government export
regulations. Licensee agrees that unless prior authorization is obtained from
the Office of Export Licensing, it will not export, reexport, or transship,
directly or indirectly, to country groups Q, S, W, Y, or Z (as defined in the
Export Administration Regulations), or Afghanistan or the People's Republic of
China (excluding Taiwan) any of the technical data disclosed to Licensee or the
direct product of such technical data or otherwise contravene the Export
Administration Regulations or other United States laws and regulations in effect
from time to time. Licensee shall indemnify 3Dlabs against any loss related to
Licensee's failure to conform to these requirements.
19. U.S. GOVERNMENT RESTRICTED RIGHTS. The Software Products and
Documentation are provided with Restricted Rights: use, duplication, or
disclosure by the Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of The Rights in Technical Data and Computer Software
clause at DFARS 252.2277013 or subparagraphs (c)(i) and (2) of the Commercial
Computer Software-Restricted Rights at 48 CFR 52.227-19, as applicable.
20. INTERNATIONAL TRANSACTIONS. If the address of Licensee as set forth
on the first page of this Agreement is outside of the United States or if
Licensee is owned or controlled by an entity whose headquarters or principal
place of business is outside of the United States, then the following additional
provisions shall apply:
20.1 This Agreement is in the English language only, which
language shall be controlling in all respects. Any versions of this Agreement in
any other language shall be for accommodation only and shall not be binding upon
either party. All communications and Documentation to be furnished under this
Agreement shall be in the English language.
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<PAGE> 9
20.2 The rights and obligations of each party of this
Agreement shall not be governed by the provisions of the U.N. Convention on
Contracts for the International Sale of Goods, but instead the provisions of
section 16 above shall apply.
21. SEVERABILITY. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable, the remaining provisions shall remain in full force and effect.
22. MISCELLANEOUS.
22.1 This Agreement and its exhibits contain the entire
understanding and agreement between the parties respecting the subject matter
hereof and all prior quotations, invoices, negotiations, understandings,
representations and agreements of the parties, whether oral or written, with
respect to the subject of this Agreement are superseded in their entirety.
22.2 This Agreement may not be supplemented, modified,
amended, released or discharged except by an instrument in writing signed by
each party's duly authorized representative.
22.3 This Agreement shall supersede, replace and terminate in
its entirety any purchase order of License for Software Products or
Documentations and all such purchase orders are subject to acceptance by 3Dlabs.
In no event will any additional terms and conditions on a purchase order be
effective unless expressly accepted by 3Dlabs in writing.
22.4 If any action at law or in equity, including an action
for declaratory relief or injunctive relief is brought to enforce or interpret
the provisions of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees in addition to any other relief to which the party
may be entitled.
22.5 All captions and headings in this Agreement are for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
22.6 Any waiver by either party of any default or breach
hereunder shall not constitute a waiver of any provision of this Agreement or of
any subsequent default or breach of the same or a different kind.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first set
forth above.
SIGNED for and on behalf of SIGNED for and on behalf of
3Dlabs Inc. (Licensee) AccelGraphics, Inc.
Signed: /s/ Raj Singh Signed: /s/ NANCY E. BUSH
------------------------- ---------------------------
Name: Raj Singh Name: Nancy E. Bush
------------------------- ---------------------------
Title: Vice President of Sales Title: CFO
------------------------- ---------------------------
Date: 8/1/95 Date: 7/31/95
------------------------- ---------------------------
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<PAGE> 11
3DLABS SOFTWARE LICENSE AGREEMENT
EXHIBIT A
SOFTWARE PRODUCTS
The Software Products covered under this agreement include:
1. GLINT 3005X Windows NT 3.5 Driver Executable (This includes
the GLINT OpenGL Installable Client Driver)
2. GLINT 300SX Windows 3.x Driver Executable
3. GLINT 300SX Windows NT 3.5 Driver Source (N.B. This does NOT
include source of the OpenGL Installable Client Driver)
4. GLINT 300SX Windows 3.x Driver Source
5. OpenGL "Installable Client Driver" Source (Subject to license
providing copy of Level 11 OpenGL license to 3Dlabs.)
6. Win '95 Driver Source & Binary (when available)
7. Diagnostic Source & Binary for GLINT Reference Design
"Montserrat."
3Dlabs agrees to supply licensee binaries and source (if available) for
other API's that 3Dlabs enables for the GLINT silicon and makes generally
available to other board level customers. Third party licensing issues and
license and support costs associated with the supply of these APl's will remain
the sole responsibility of the licensee
3Dlabs agrees [* * * *].
3Dlabs agrees to treat licensee equally with its other board level
customers for supply of binaries and source (if available) for other API drivers
that 3Dlabs enables for the GLINT silicon and makes generally available to other
board level customers.
Third party licensing issues and license and support costs associated
with the supply of these third party API drivers will remain the sole
responsibility of the licensee.
Licensee is aware that 3Dlabs versions of these drivers are solely
designed to run on the then current 3Dlabs reference hardware.
<PAGE> 12
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT ("Agreement") is made and entered into
as of the Effective Date, by and between 3Dlabs Inc. ("3Dlabs") with principal
offices at 2010 North First Street, Suite 403, San Jose, California 95131, USA
and AccelGraphics, Inc. ("Licensee"), a company with principal offices at 1942
Zanker Rd., San Jose, California 95112.
RECITALS
A. 3Dlabs is the owner of, or has acquired rights to, the
Software Products and the Documentation (as defined below); and
B. 3Dlabs desires to grant to Licensee and Licensee desires to
obtain from 3Dlabs a non-exclusive license to use the Software Products and
Documentation on the terms and conditions of the Agreement;
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. DEFINITIONS.
1.1 "Software Products" shall mean the computer programs
identified on Exhibit A to this Agreement that become subject to this Agreement
as set forth in Section 2 below, together with any subsequent error corrections
of updates supplied to Licensee by 3Dlabs pursuant to this Agreement.
1.2 "Derivative Software Products" shall mean computer
programs in machine readable binary or source code format developed or otherwise
acquired by Licensee which are a modification of enhancement to, derived from or
based upon Software Products.
1.3 "Documentation" shall mean all manuals, user
documentation, and other related materials pertaining to the Software Products
that 3Dlabs provides to Licensee for use in connection with the Software
Products.
1.4 "Effective Date" shall mean the last date set forth
opposite the parties signature lines.
1.5 "3Dlabs Chip Products" shall mean the 3Dlabs
graphics accelerator products listed on Exhibit A.
2. INCLUSION OF SOFTWARE PRODUCTS UNDER THE AGREEMENT.
2.1 Binary Format. Upon Licensee's purchase of any 3Dlabs Chip
Products, the executable binary format Software Products listed in Exhibit A for
such 3Dlabs Chip Products shall become "Software Products' for purposes of this
License Agreement.
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<PAGE> 13
2.2 Source Code Format. Upon Licensee's purchase of any 3Dlabs
Chip Product, Licensee may place an order with 3Dlabs for one or more of the
source code Software Products listed in Exhibit A for such 3Dlabs Chip Product.
Licensee's order shall include payment of the license fee for such source code
as specified in Exhibit A. Upon 3Dlabs' acceptance of such order, such source
code shall become "Software Products" for purposes of this Agreement.
2.3 Modification of Software Products. The parties may amend
Exhibit A from time to time in writing. In addition (a) if 3Dlabs discontinues
any 3Dlabs Chip Product or Software Products listed on Exhibit A, then 3Dlabs
may modify Exhibit A to delete such Products, and (b) if Licensee purchases one
or more new 3Dlabs graphics accelerator products from 3Dlabs, then 3Dlabs may
modify Exhibit A to include such products as 3Dlabs Chip Products under Exhibit
A and to add software products designed for use with such 3Dlabs Chip Products
as "Software Products" under Exhibit A.
3. GRANT OF RIGHTS. From the Effective Date and as Software
Products are added to this Agreement under Section 2 above, until terminated in
accordance with the terms of this Agreement:
3.1 Binary Format. 3Dlabs hereby grants, and Licensee
hereby accepts, subject to the terms and conditions of this Agreement, a
non-exclusive license to reproduce, distribute, export, upgrade and sublicense
others to use the binary format Software Products (the "Binary Software
Products") and the related Documentation solely for use with 3Dlabs Chip
Products purchased by Licensee from 3Dlabs.
Notwithstanding Licensee's right to sublicense the
Binary Software Products to others for use with the 3Dlabs Chip Products,
Licensee shall have no right to sublicense or authorize parties to reproduce,
copy or otherwise manufacture the Binary Software Products, without 3Dlabs'
prior written permission. Licensee agrees not to attempt to modify, reverse
engineer, disassemble, decompile or trace the execution of the Binary Software
products, or of any portion thereof.
3.2 Source Code Format.
3.2.1 Drivers Source Code. 3Dlabs hereby grants
and Licensee hereby accepts a nonexclusive, nontransferable license to use and
modify the source code for drivers Software Products solely for the purpose of
developing Derivative Software Products for use with 3Dlabs Chip Products
purchased by Licensee from 3Dlabs. Licensee shall have no right to disclose,
sub-license, export, sell or otherwise distribute the Software Products,
Derivative Software Products or any portion thereof in source code format nor
shall Licensee authorize other parties to market, reproduce, have reproduced or
otherwise manufacture the Software products or Derivative Software Products in
source code format.
ANY LICENSE TO USE THE SOURCE CODE OF A DRIVERS SOFTWARE PRODUCT
CONTAINING MICROSOFT CORPORATION'S SOFTWARE IS SUBJECT TO LICENSEE HAVING
PHYSICAL POSSESSION OF AN ORIGINAL MICROSOFT
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<PAGE> 14
SOFTWARE LICENSE FOR THE APPLICABLE MICROSOFT VERSION AT ALL TIMES DURING THE
USE THEREOF. LICENSEE SHALL HOLD 3DLABS HARMLESS FROM ANY LOSS, LIABILITY AND/OR
SETTLEMENT COSTS (INCLUDING REASONABLE ATTORNEYS' FEES) RESULTING FROM ANY CLAIM
AGAINST 3DLABS RELATED TO LICENSEE'S FAILURE TO HAVE SUCH A LICENSE DURING
LICENSEE'S USE OF SUCH SOFTWARE.
4. DELIVERY.
4.1 Binary Software Products. After the Effective Date, 3Dlabs
shall deliver to Licensee a master copy of the Binary Software Products licensed
under this Agreement for use with such 3Dlabs Chip Product, in object code
format and applicable Documentation. 3Dlabs shall deliver the foregoing in
electronic files or disk format, at 3Dlabs' option.
4.2 Source Software Products. After 3Dlabs' receipt of payment
and acceptance of Licensee's order for Software Products in source code format,
as set forth in Section 2 above, 3Dlabs shall deliver to licensee the source
code for the applicable Software Products, together with related Documentation
3Dlabs shall deliver foregoing m electronic files or disk format, at 3Dlabs'
option.
5. MODIFICATIONS.
5.1 Error Corrections and Updates. 3Dlabs will provide
Licensee with error corrections, bug fixes, patches or other updates to each
Software Product in object code format to the extent available in accordance
with 3Dlabs' release schedule for a period of ninety (90) days from the date of
3Dlabs' delivery of the original Software Product(s) under this Agreement.
5.2 Modifications by 3Dlabs. 3Dlabs shall be under no
obligation to make modifications that may be required for Licensee-specific
hardware, firmware, software, or other requirements. All error corrections, bug
fixes, patches, updates or other modifications to the Software Products or
Documentation made by 3Dlabs or its suppliers shall be the sole property of
3Dlabs or of its suppliers, or both.
5.3 Modifications by Licensee. Licensee shall promptly provide
to 3Dlabs all error corrections, bug fixes, patches, updates or other
modifications to the Software Products or Documentation made by Licensee or by
Licensee's sublicensees and hereby grants to 3Dlabs a limited worldwide,
non-royalty bearing license to use, modify, enhance, edit, reformat, rewrite,
copy, reissue and create derivative works of, sublicense and distribute such
modifications, provided that 3Dlabs shall sublicense such modifications under
terms that are no less restrictive than 3D/labs employs for its similar
products.
6. LICENSE FEES AND PAYMENT.
6.1 License Fee. In consideration of the license rights
granted in Section 3 above, Licensee shall pay the License fees or other
consideration for the Software Products and Documentation as set forth on
Exhibit A to this Agreement.
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<PAGE> 15
6.2 Taxes and Other Charges. Licensee shall be responsible for
paying all (i) sales, use, excise, value-added or other tax or governmental
charges imposed on the licensing or use of the Software Products, Derivative
Software Products and Documentation (ii) freight, insurance and installation
charges, and (iii) import or export duties or like charges.
7. DERIVATIVE SOFTWARE PRODUCTS.
7.1 Title to Software Products Incorporated in Derivative
Software Products. Title to and ownership of any portion of the Software
Products incorporated into a Derivative Software Product shall at all times
remain with 3Dlabs or its supplier, or both, and Licensee shall not have any
title or ownership interest therein.
7.2 Maintenance of Derivative Software Products. 3Dlabs shall
not be required to maintain or otherwise repair any Derivative Software
Products. Any assistance in repairing errors or defects in the Derivative
Software Products which may be provided by 3Dlabs, in its sole discretion, shall
be subject to the terms of a separate agreement under which Licensee shall pay
3Dlabs in accordance with 3Dlabs' then-current charges for such services.
7.3 Products Developed by 3Dlabs. Nothing contained in this
Agreement shall be construed to limit 3Dlabs' rights to modify the Software
Products or to develop other Products which are similar to or offer the same or
similar improvements as Derivative Software Products developed by Licensee.
8. PROTECTION OF SOFTWARE PRODUCTS.
8.1 Proprietary Notices. Licensee agrees not to remove,
obliterate, or cancel from view any copyright, trademark, confidentiality or
other proprietary notice or mark appearing on any of the Software Products or on
output generated by the Software Products and to reproduce and include the same
on each copy of the Software Products and Derivative Software Products.
8.2 Ownership and Protection of Software Products. Licensee
acknowledges that all copies of the Software Products in any form provided by
3Dlabs or made by Licensee are the sole property of 3Dlabs or its suppliers, or
both. Licensee shall not have any right, title or interest in or to any Software
Products, or copies thereof except as expressly provided in this Agreement, and
further shall secure and protect all Software Products, Derivative Software
Products and Documentation consistent with maintenance of 3Dlabs' proprietary
rights therein.
8.3 Copies. Licensee shall not copy the source code of the
Software Products, except that Licensee may make one copy of the source code
solely for archival or backup purpose and may make copies of the source code
solely for use by Licensee's employees who have a need to use such source code
for the purposes authorized under this agreement. All source code of the
Software Products shall remain on Licensee's business premises.
8.4 Mark Ownership. Nothing contained in this Agreement shall
be construed as conferring any license or right with respect to any trademark,
trade name, brand name, or the corporate name of 3Dlabs, or any of 3Dlabs'
suppliers.
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<PAGE> 16
9. CONFIDENTIALITY.
9.1 Maintenance of Confidential Information. Licensee
acknowledges that the Software Products and Documentation contain valuable
proprietary information and trade secrets of 3Dlabs or its suppliers, or both,
and Licensee will not release, disclose or otherwise permit access to such
confidential information or use the information in such a way that other parties
can gain access to such information. In particular, Licensee shall not disclose
or cause to be disclosed the Software Products code, documentation, or other
information contained in the source code to any third party without the prior
written consent of 3Dlabs and, where applicable, 3Dlabs' suppliers. 3Dlabs and
Licensee agree to mark written materials as "Confidential" if they are to be
treated as confidential in nature. Oral communications that are confidential in
nature will be identified as such before, during or immediately after the
communication. Licensee warrants that all those individuals having access to the
Software Products under this Agreement will observe and perform the obligations
in this Agreement with respect to confidential information.
9.2 Injunctive Relief. Licensee acknowledges that the
unauthorized use, transfer, sublicensing or disclosure of the Software Products,
Derivative Software Products, Documentation or copies thereof may cause
irreparable injury to 3Dlabs, and under such circumstances 3Dlabs shall be
entitled to equitable relief, including, but not limited to, preliminary and
permanent injunctive relief, and Licensee waives any requirements that a bond be
posted.
10. LIMITED WARRANTY; INFRINGEMENT. 3Dlabs warrants to Licensee
that as of the date of this Agreement it has no knowledge that the Software
Products or Documentation infringe or otherwise make unauthorized use of any
copyright, trademark, trade secret or proprietary right of any party. If a court
of competent jurisdiction rules that 3Dlabs has infringed upon the copyright,
trademark, trade secret or proprietary right of a third party, 3Dlabs shall, at
its option, obtain a license from that third party, modify the infringing
Software Product from Licensee and refund to Licensee all amounts that Licensee
paid to 3Dlabs for the Software Products. The remedy for infringement is
Licensee's exclusive remedy, and Licensee hereby waives all other remedies,
rights, causes of actions and claims against 3Dlabs and its suppliers, whether
in contract, tort, by statute, or otherwise, as well as any and all damages for
infringement and other indemnity, whether direct, consequential or otherwise.
THE WARRANTY AND INDEMNITY IN THIS SECTION 10 DOES NOT APPLY TO USE OF SOFTWARE
PRODUCTS IN COMBINATION WITH ANY OTHER PRODUCTS.
11. DISCLAIMER AND LIMITATION OF LIABILITY.
11.1 Disclaimer of Warranties. THE SOFTWARE PRODUCTS AND
DOCUMENTATION AND ANY AND ALL UPDATES AN D MODIFICATIONS TO THE SAME ARE
LICENSED "AS IS" AND THE WARRANTY PROVIDED IN SECTION 10 ABOVE IS THE SOLE AND
EXCLUSIVE WARRANTY OFFERED BY 3DLABS. 3DLABS DOES NOT REPRESENT OR WARRANT THAT
ALL ERRORS IN THE SOFTWARE PRODUCTS OR DOCUMENTATION WILL BE CORRECTED OR THAT
THE SOFTWARE PRODUCTS WILL RUN ERROR FREE. THERE ARE NO OTHER WARRANTIES
RESPECTING THE SOFTWARE PRODUCTS, DOCUMENTATION OR SERVICES PROVIDED UNDER THIS
AGREEMENT, EITHER EXPRESS OR IMPLIED, INCLUDING
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<PAGE> 17
BUT NOT LIMITED TO ANY WARRANTY OF DESIGN, MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE, EVEN IF 3DLABS HAS BEEN INFORMED OF SUCH PURPOSE. NO AGENT
OF 3DLABS IS AUTHORIZED TO ALTER OR EXCEED THE WARRANTY OBLIGATIONS OF 3DLABS AS
SET FORTH IN THIS AGREEMENT.
11.2 Limitation of Remedies and Liability. 3DLABS SHALL NOT BE
LIABLE TO LICENSEE OR TO ANY OF LICENSEE'S SUBLICENSEES, CUSTOMERS, OR END-USERS
FOR ANY LOSS OF PROFIT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE LICENSING OR USE OF THE
SOFTWARE PRODUCTS, DERIVATIVE SOFTWARE PRODUCTS OR DOCUMENTATION OR FOR ANY
ERROR OR DEFECT IN THE SOFTWARE PRODUCTS OR DOCUMENTATION. Notwithstanding
Section 10 (Limited Warranty, Infringement) the maximum liability of 3Dlabs
arising out of or in connection with license, use or other employment of any
Software Product delivered to Licensee under this Agreement, whether such
liability arises from any claim based on breach or repudiation of contract,
warranty, tort or otherwise, shall in no case exceed the actual price paid to
3Dlabs by Licensee for the Software Product whose license, use, or other
employment gives rise to the liability.
12. LICENSEE'S INDEMNIFICATION. Licensee shall indemnify 3Dlabs
and its suppliers and hold them harmless from any and all liabilities, claims,
costs, losses, and expenses including, but not limited to, reasonable attorneys'
fees and costs of suit incurred by 3Dlabs or its suppliers, or both, arising out
of or relating to Licensee's misuse, modification, upgrade, additions,
alteration, sale, marketing, reproduction, sublicensing or other distribution of
the Software Products or Derivative Software Products.
13. TERM OF AGREEMENT. This Agreement shall be effective on the
Effective Date and shall continue in effect until terminated in accordance with
the terms and conditions of Section 14.
14. DEFAULT AND TERMINATION.
14.1 Events of Default. Either party may terminate this
Agreement for material breach by providing thirty (30) days written notice to
the breaching party, unless the breach is corrected during such thirty (30) day
period. Material breach on the pan of Licensee shall include, but not be limited
to, filing a petition to declare such party insolvent or bankrupt which is not
dismissed within thirty (30) days; making an assignment or other arrangement for
the benefit of creditors, or being dissolved or liquidated.
14.2 Termination by 3Dlabs. 3Dlabs may terminate this
Agreement as to any Software Product, effective upon termination of 3Dlabs'
right with respect to such Software Product.
14.3 Obligations on Expiration or Termination. Upon expiration
or termination of this Agreement, all rights granted by this Agreement shall
revert to 3Dlabs and Licensee shall cease and desist all use of the Software
Products and Documentation. Licensee shall destroy or
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<PAGE> 18
deliver to 3Dlabs within three (3) days of termination all full or partial
copies of the Software Products and Documentation in Licensee's possession or
under its control, other than those properly distributed by Licensee prior to
termination, and will warrant to 3Dlabs such destruction or delivery. Licensee's
failure to comply with the obligations of this Section 14.3 will constitute
unauthorized use of the Software Products and Documentation, entitling to
3Dlabsequitable relief under Section 9.2 above.
14.4 No Liability. Neither party shall be liable to the
other for terminating this Agreement in accordance with its terms.
14.5 Survival. The following provisions of this Agreement
shall survive its termination or expiration: Sections 6 (License fees and
payment), 7 (Derivative Software Products), 8 (Protection of Software Products),
9 (Confidentiality), 10 (Limited Warranty, Infringement), 11 (Disclaimer and
Limitation of Liability), 12 (Licensee's Indemnity), and 14 through 20 and such
other provisions which, from their context in this Agreement, are intended to
survive its termination or expiration.
15. NOTICES. All notices, authorizations, and requests in connection
with this Agreement shall be deemed given (i) five days after being deposited in
the mail, postage prepaid, certified, or registered, return receipt requested,
or (ii) one day after being sent by overnight courier, charges prepaid, with
confirming fax; and addressed as first set forth above or to such other address
as the party to receive the notice or request so designates by written notice to
the other.
16. NONASSIGNABILITY. Licensee shall not assign or transfer this
Agreement or all or any part of its rights hereunder, by operation of law or
otherwise, without the prior written consent of 3Dlabs. Any unauthorized
assignment or transfer shall be null and void and shall constitute a default,
entitling 3Dlabs to terminate this Agreement under Section 14 above. This
Agreement shall inure to the benefit of and be binding upon any permitted
successor or assign.
17. GOVERNING LAW JURISDICTION AND VENUE. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California. The California state courts of Santa Clara County,
California (or, if there is exclusive federal jurisdiction, the United States
District Court for the Northern District of California) shall have exclusive
jurisdiction and venue over any dispute arising out of or relating to this
Agreement, and Licensee hereby consents to the jurisdiction and venue or such
courts. Licensee shall file any action arising out of or relating to this
Agreement on the appropriate court within two (2) years from the date that such
cause of action accrues.
18. EXPORT REQUIREMENTS. The Software Products, Derivative Software
Products, Documentation and all related technical information or materials are
subject to export controls and are licensable under the U.S. Government export
regulations. Licensee agrees that unless prior authorization is obtained from
the Office of Export Licensing, it will not export, reexport, or transship,
directly or indirectly, to country groups Q, S, W, Y, or Z (as defined in the
Export Administration Regulations), or Afghanistan or the People's Republic of
China (excluding Taiwan) any of the technical data disclosed to Licensee or the
direct product of such technical
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<PAGE> 19
data or otherwise contravene the Export Administration Regulations or other
United States laws and regulations in effect from time to time. Licensee shall
indemnify 3Dlabs against any loss related to Licensee's failure to conform to
these requirements.
19. U.S. GOVERNMENT RESTRICTED RIGHTS. The Software Products and
Documentation are provided with Restricted Rights: use, duplication, or
disclosure by the Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of The Rights in Technical Data and Computer Software
clause at DFARS 252.2277013 or subparagraphs (c)(i) and (2) of the Commercial
Computer Software-Restricted Rights at 48 CFR 52.227-19, as applicable.
20. INTERNATIONAL TRANSACTIONS. If the address of Licensee as set
forth on the first page of this Agreement is outside of the United States or if
Licensee is owned or controlled by an entity whose headquarters or principal
place of business is outside of the United States, then the following additional
provisions shall apply:
20.1 This Agreement is in the English language only, which
language shall be controlling in all respects. Any versions of this Agreement in
any other language shall be for accommodation only and shall not be binding upon
either party. All communications and Documentation to be furnished under this
Agreement shall be in the English language.
20.2 The rights and obligations of each party of this
Agreement shall not be governed by the provisions of the U.N. Convention on
Contracts for the International Sale of Goods, but instead the provisions of
section 16 above shall apply.
21. SEVERABILITY. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable, the remaining provisions shall remain in full force and effect.
22. MISCELLANEOUS.
22.1 This Agreement and its exhibits contain the entire
understanding and agreement between the parties respecting the subject matter
hereof and all prior quotations, invoices, negotiations, understandings,
representations and agreements of the parties, whether oral or written, with
respect to the subject of this Agreement are superseded in their entirety.
22.2 This Agreement may not be supplemented, modified,
amended, released or discharged except by an instrument in writing signed by
each party's duly authorized representative.
22.3 This Agreement shall supersede, replace and terminate in
its entirety any purchase order of License for Software Products or
Documentations and all such purchase orders are subject to acceptance by 3Dlabs.
In no event will any additional terms and conditions on a purchase order be
effective unless expressly accepted by 3Dlabs in writing.
22.4 If any action at law or in equity, including an action
for declaratory relief or injunctive relief is brought to enforce or interpret
the provisions of this Agreement, the prevailing
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<PAGE> 20
party shall be entitled to reasonable attorneys' fees in addition to any other
relief to which the party may be entitled.
22.5 All captions and headings in this Agreement are for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
22.6 Any waiver by either party of any default or breach
hereunder shall not constitute a waiver of any provision of this Agreement or of
any subsequent default or breach of the same or a different kind.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first set
forth above.
SIGNED for and on behalf of SIGNED for and on behalf of
3Dlabs Inc. (Licensee) AccelGraphics, Inc.
Signed: Signed: /s/ Ralph Nichols
-------------------- ------------------------
Name: Name: Ralph Nichols
-------------------- ------------------------
Title: Title: VP, Engineering
-------------------- ------------------------
Date: Date: 1/23/96
-------------------- ------------------------
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<PAGE> 22
3DLABS SOFTWARE LICENSE AGREEMENT
EXHIBIT A
SOFTWARE PRODUCTS
The Software Products covered under this agreement include:
1. GLINT Heidi Driver for Windows NT Binaries
2. GLINT Heidi Driver for Windows NT Source
[* * * * * * *].
As per Section 3.2.1 Licensee warrants that the Software Products source code
will be used solely for the purpose of developing Derivative Software Products
for use with 3Dlabs Chip Products purchased by Licensee from 3Dlabs.
Licensee agrees that any Software Products labeled or described by 3Dlabs as
"Beta" or Derivative Software Products derived from such Software Products will
be clearly labeled and described as "Beta" products when distributed by the
Licensee unless the Licensee has received written dispensation from 3Dlabs.
SIGNED for and on behalf of SIGNED for and on behalf of
3Dlabs Inc. (Licensee) AccelGraphics, Inc.
Signed: Signed:
-------------------- ------------------------
Name: Name:
-------------------- ------------------------
Title: Title:
-------------------- ------------------------
Date: Date:
-------------------- ------------------------
<PAGE> 23
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT ("Agreement") is made and entered into
as of the Effective Date, by and between 3Dlabs Inc. ("3Dlabs") with principal
offices at 181 Metro Drive, Suite 520, San Jose, CA 95110, USA and
AccelGraphics, Inc. ("Licensee"), a company with principal offices at 1942
Zanker Rd., San Jose, California 95112.
RECITALS
A. 3Dlabs is the owner of, or has acquired rights to, the
Software Products and the Documentation (as defined below); and
B. 3Dlabs desires to grant to Licensee and Licensee desires to
obtain from 3Dlabs a non-exclusive license to use the Software Products and
Documentation on the terms and conditions of the Agreement;
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. DEFINITIONS.
1.1 "Software Products" shall mean the computer programs
identified on Exhibit A to this Agreement that become subject to this Agreement
as set forth in Section 2 below, together with any subsequent error corrections
of updates supplied to Licensee by 3Dlabs pursuant to this Agreement.
1.2 "Derivative Software Products" shall mean computer
programs in machine readable binary or source code format developed or otherwise
acquired by Licensee which are a modification of enhancement to, derived from or
based upon Software Products.
1.3 "Documentation" shall mean all manuals, user
documentation, and other related materials pertaining to the Software Products
that 3Dlabs provides to Licensee for use in connection with the Software
Products.
1.4 "Effective Date" shall mean the last date set forth
opposite the parties signature lines.
1.5 "3Dlabs Chip Products" shall mean the 3Dlabs graphics
accelerator products listed on Exhibit A.
1.6 "Software Developers" shall mean a company or person
engaged in development of software for use with 3Dlabs Chip Products.
<PAGE> 24
2. INCLUSION OF SOFTWARE PRODUCTS UNDER THE AGREEMENT.
2.1 Binary Format. Upon Licensee's purchase of any 3Dlabs
Chip Products, the executable binary format Software Products listed in Exhibit
A for such 3Dlabs Chip Products shall become "Software Products' for purposes of
this License Agreement.
2.2 Source Code Format. Upon Licensee's purchase of any
3Dlabs Chip Product, Licensee may place an order with 3Dlabs for one or more of
the source code Software Products listed in Exhibit A for such 3Dlabs Chip
Product. Licensee's order shall include payment of the license fee for such
source code as specified in Exhibit A. Upon 3Dlabs' acceptance of such order,
such source code shall become "Software Products" for purposes of this
Agreement.
2.3 Modification of Software Products. The parties may
amend Exhibit A from time to time in writing. In addition (a) if 3Dlabs
discontinues any 3Dlabs Chip Product or Software Products listed on Exhibit A,
then 3Dlabs may modify Exhibit A to delete such Products, and (b) if Licensee
purchases one or more new 3Dlabs graphics accelerator products from 3Dlabs, then
3Dlabs may modify Exhibit A to include such products as 3Dlabs Chip Products
under Exhibit A and to add software products designed for use with such 3Dlabs
Chip Products as "Software Products" under Exhibit A.
3. GRANT OF RIGHTS. From the Effective Date and as Software
Products are added to this Agreement under Section 2 above, until terminated in
accordance with the terms of this Agreement:
3.1 Binary Format. 3Dlabs hereby grants, and Licensee
hereby accepts, subject to the terms and conditions of this Agreement, a
non-exclusive license to reproduce, distribute, export, upgrade and sublicense
others to use the binary format Software Products (the "Binary Software
Products") and the related Documentation solely for use with 3Dlabs Chip
Products purchased by Licensee from 3Dlabs.
Licensee agrees not to attempt to modify, reverse
engineer, disassemble, decompile or trace the execution of the Binary Software
products, or of any portion thereof.
3.2 Source Code Format.
3.2.1 Source Code. 3Dlabs hereby grants and
Licensee hereby accepts a non-exclusive, nontransferable license to use and
modify the source code for the Software Products solely for the purpose of
developing Derivative Software Products for use with 3Dlabs Chip Products
purchased by Licensee from 3Dlabs.
Licensee hereby represents, covenants and warrants
that it will only distribute source code for the Software Products to the
following third parties:
(i) Software Developers who have entered into a
written agreement which restricts the Software Developers from distributing
source code for the Software Products to any third party. Exhibit B contains a
sample software license agreement.
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4. DELIVERY.
4.1 Binary Software Products. After the Effective Date
3Dlabs shall deliver to Licensee a master copy of the Binary Software Products
licensed under this Agreement for use with such 3Dlabs Chip Product, in object
code format and applicable Documentation. 3Dlabs shall deliver the foregoing in
electronic files or disk format, at 3Dlabs' option.
4.2 Source Software Products. After 3Dlabs' receipt of
payment and acceptance of Licensee's order for Software Products in source code
format, as set forth in Section 2 above, 3Dlabs shall deliver to licensee the
source code for the applicable Software Products, together with related
Documentation. 3Dlabs shall deliver foregoing in electronic files or disk
format, at 3Dlabs' option.
5. MODIFICATIONS.
5.1 Modifications by 3Dlabs. 3Dlabs shall be under no
obligation to make modifications that may be required for Licensee-specific
hardware, firmware, software, or other requirements. All error corrections, bug
fixes, patches, updates or other modifications to the Software Products or
Documentation made by 3Dlabs or its suppliers shall be the sole property of
3Dlabs or of its suppliers, or both.
5.2 Modifications by Licensee. All error corrections, bug
fixes, patches, updates or other modifications to the Software Products or
Documentation made by Licensee or by Licensee's sublicensees shall be the sole
property and responsibility of Licensee. 3Dlabs shall not be required to
maintain or otherwise repair any Software Products that Licensee has modified or
caused to be modified.
6. LICENSE FEES AND PAYMENT.
6.1 License Fee. In consideration of the license rights
granted in Section 3 above, Licensee shall pay the License fees or other
consideration for the Software Products and Documentation as set forth on
Exhibit A to this Agreement.
6.2 Taxes and Other Charges. Licensee shall be
responsible for paying all (i) sales, use, excise, value-added or other tax or
governmental charges imposed on the licensing or use of the Software Products,
Derivative Software Products and Documentation (ii) freight, insurance and
installation charges, and (iii) import or export duties or like charges.
7. DERIVATIVE SOFTWARE PRODUCTS.
7.1 Title to Software Products Incorporated in Derivative
Software Products. Title to and ownership of any portion of the Software
Products incorporated into a Derivative Software Product shall at all times
remain with 3Dlabs or its supplier, or both, and Licensee shall not have any
title or ownership interest therein.
7.2 Title to Derivative Software Products. Title to and
ownership of any portion of a Derivative Software product created by Licensee
and now owned by 3Dlabs or its
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<PAGE> 26
supplier, or both, pursuant to section 7.1 above, shall be held by Licensee. Any
and all upgrades, additions, adaptations, or modifications to the Software
Products made by Licensee will remain the sole property and responsibility of
Licensee.
7.3 3Dlabs' Use of Derivative Software Products. Licensee
agrees to provide binary copies of any Derivative Software Products to 3Dlabs
free of charge. Licensee hereby grants 3Dlabs a non-royalty bearing, worldwide
license to use the Derivative Software Products for demonstrations and
evaluations.
7.4 Maintenance of Derivative Software Products. 3Dlabs
shall not be required to maintain or otherwise repair any Derivative Software
Products.
7.5 Products Developed by 3Dlabs. Nothing contained in
this Agreement shall be construed to limit 3Dlabs' rights to modify the Software
Products or to develop other Products which are similar to or offer the same or
similar improvements as Derivative Software Products developed by Licensee,
subject to Licensee's rights.
8. PROTECTION OF SOFTWARE PRODUCTS.
8.1 Proprietary Notices. Licensee agrees not to remove,
obliterate, or cancel from view any copyright, trademark, confidentiality or
other proprietary notice or mark appearing on any of the Software Products or on
output generated by the Software Products and to reproduce and include the same
on each copy of the Software Products and Derivative Software Products.
8.2 Ownership and Protection of Software Products.
Licensee acknowledges that all copies of the Software Products in any form
provided by 3Dlabs or made by Licensee are the sole property of 3Dlabs or its
suppliers, or both. Licensee shall not have any right, title or interest in or
to any Software Products, or copies thereof except as expressly provided in this
Agreement, and further shall secure and protect all Software Products,
Derivative Software Products and Documentation consistent with maintenance of
3Dlabs' proprietary rights therein.
8.3 Mark Ownership. Nothing contained in this Agreement
shall be construed as conferring any license or right with respect to any
trademark, trade name, brand name, or the corporate name of 3Dlabs, or any of
3Dlabs' suppliers.
9. CONFIDENTIALITY.
9.1 Maintenance of Confidential Information. Licensee
acknowledges that the Software Products and Documentation contain valuable
proprietary information and trade secrets of 3Dlabs or its suppliers, or both,
and Licensee will not release, disclose or otherwise permit access to such
confidential information or use the information in such a way that other parties
can gain access to such information. In particular, Licensee shall only disclose
or cause to be disclosed the Software Products code, documentation, or other
information contained in the source code to third parties as described in
paragraph 3.2.1. 3Dlabs and Licensee agree to mark written materials as
"Confidential" if they are to be treated as confidential in nature. Oral
communications that are confidential in nature will be identified as such
before, during or
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immediately after the communication. Licensee warrants that all those
individuals having access to the Software Products under this Agreement will
observe and perform the obligations in this Agreement with respect to
confidential information.
9.2 Injunctive Relief. Licensee acknowledges that the
unauthorized use, transfer, sublicensing or disclosure of the Software Products,
Derivative Software Products, Documentation or copies thereof may cause
irreparable injury to 3Dlabs, and under such circumstances 3Dlabs shall be
entitled to equitable relief, including, but not limited to, preliminary and
permanent injunctive relief, and Licensee waives any requirements that a bond be
posted.
10. LIMITED WARRANTY; INFRINGEMENT. 3Dlabs warrants to licensee
that as of the date of this Agreement it has no knowledge that the Software
Products or Documentation infringe or otherwise make unauthorized use of any
copyright, trademark, trade secret or proprietary right of any party. If a court
of competent jurisdiction rules that 3Dlabs has infringed upon the copyright,
trademark, trade secret or proprietary right of a third party, 3Dlabs shall, at
its option, obtain a license from that third party, modify the infringing
Software Product from Licensee and refund to Licensee all amounts that Licensee
paid to 3Dlabs for the Software Products. The remedy for infringement is
Licensee's exclusive remedy, and Licensee hereby waives all other remedies,
rights, causes of actions and claims against 3Dlabs and its suppliers, whether
in contract, tort, by statute, or otherwise, as well as any and all damages for
infringement and other indemnity, whether direct, consequential or otherwise.
THE WARRANTY AND INDEMNITY IN THIS SECTION 10 DOES NOT APPLY TO USE OF SOFTWARE
PRODUCTS IN COMBINATION WITH ANY OTHER PRODUCTS.
11. DISCLAIMER AND LIMITATION OF LIABILITY.
11.1 Disclaimer of Warranties. THE SOFTWARE PRODUCTS AND
DOCUMENTATION AND ANY AND ALL UPDATES AND MODIFICATIONS TO THE SAME ARE LICENSED
"AS IS" AND THE WARRANTY PROVIDED IN SECTION 10 ABOVE IS THE SOLE AND EXCLUSIVE
WARRANTY OFFERED BY 3DLABS. 3DLABS DOES NOT REPRESENT OR WARRANT THAT ALL ERRORS
IN THE SOFTWARE PRODUCTS OR DOCUMENTATION WILL BE CORRECTED OR THAT THE SOFTWARE
PRODUCTS WILL RUN ERROR FREE. THERE ARE NO OTHER WARRANTIES RESPECTING THE
SOFTWARE PRODUCTS, DOCUMENTATION OR SERVICES PROVIDED UNDER THIS AGREEMENT,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF DESIGN,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, EVEN IF 3DLABS HAS BEEN
INFORMED OF SUCH PURPOSE. NO AGENT OF 3DLABS IS AUTHORIZED TO ALTER OR EXCEED
THE WARRANTY OBLIGATIONS OF 3DLABS AS SET FORTH IN THIS AGREEMENT.
11.2 Limitation of Remedies and Liability. 3DLABS SHALL
NOT BE LIABLE TO LICENSEE OR TO ANY OF LICENSEE'S SUBLICENSEES, CUSTOMERS, OR
END-USERS FOR ANY LOSS OF PROFIT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE LICENSING OR USE OF THE
SOFTWARE PRODUCTS, DERIVATIVE SOFTWARE PRODUCTS OR DOCUMENTATION OR FOR ANY
ERROR OR DEFECT IN THE
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SOFTWARE PRODUCTS OR DOCUMENTATION. The maximum liability of 3Dlabs arising out
of or in connection with license, use or other employment of any Software
Product delivered to Licensee under this Agreement, whether such liability
arises from any claim based on breach or repudiation of contract, warranty, tort
or otherwise, shall in no case exceed the actual price paid to 3Dlabs by
Licensee for the Software Product whose license, use or other employment gives
rise to the liability.
12. LICENSEE'S INDEMNIFICATION. Licensee shall indemnify 3Dlabs
and its suppliers and hold them harmless from any and all liabilities, claims,
costs, losses, and expenses including, but not limited to, reasonable attorneys'
fees and costs of suit incurred by 3Dlabs or its suppliers, or both, arising out
of or relating to Licensee's misuse, modification, upgrade, additions,
alteration, sale, marketing, reproduction, sublicensing or other distribution of
the Software Products or Derivative Software Products.
13. TERM OF AGREEMENT. This Agreement shall be effective on the
Effective Date and shall continue in effect until terminated in accordance with
the terms and conditions of Section 14.
14. DEFAULT AND TERMINATION.
14.1 Events of Default. Either party may terminate this
Agreement for material breach by providing thirty (30) days written notice to
the breaching party, unless the breach is corrected during such thirty (30) day
period. Material breach on the part of Licensee shall include, but not be
limited to, filing a petition to declare such party insolvent or bankrupt which
is not dismissed within thirty (30) days; making an assignment or other
arrangement for the benefit of creditors, or being dissolved or liquidated.
14.2 Termination by 3Dlabs. 3Dlabs may terminate this
Agreement as to any Software Product, effective upon termination of 3Dlabs'
right with respect to such Software Product.
14.3 Obligations on Expiration or Termination. Upon
expiration or termination of this Agreement, all rights granted by this
Agreement shall revert to 3Dlabs and Licensee shall cease and desist all use of
the Software Products and Documentation. Licensee shall destroy or deliver to
3Dlabs within thirty (30) days of termination all full or partial copies of the
Software Products and Documentation in Licensee's possession or under its
control, other than those properly distributed by Licensee prior to termination,
and will warrant to 3Dlabs such destruction or delivery. Licensee's failure to
comply with the obligations of this Section 14.3 will constitute unauthorized
use of the Software Products and Documentation, entitling to 3Dlabsequitable
relief under Section 9.2 above.
14.4 No Liability. Neither party shall be liable to the
other for terminating this Agreement in accordance with its terms.
14.5 Survival. The following provisions of this Agreement
shall survive its termination or expiration: Sections 6 (License Fees and
Payment), 7 (Derivative Software
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<PAGE> 29
Products), 8 (Protection of Software Products), 9 (Confidentiality), 11
(Disclaimer and Limitation of Liability), 12 (Licensee's Indemnity), and 14
through 20 and such other provisions which, from their context in this
Agreement, are intended to survive its termination or expiration.
15. NOTICES. All notices, authorizations, and requests in connection
with this Agreement shall be deemed given (i) five days after being deposited in
the mail, postage prepaid, certified, or registered, return receipt requested,
or (ii) one day after being sent by overnight courier, charges prepaid, with
confirming fax; and addressed as first set forth above or to such other address
as the party to receive the notice or request so designates by written notice to
the other.
16. NONASSIGNABILITY. Licensee shall not assign or transfer this
Agreement or all or any part of its rights hereunder, by operation of law or
otherwise, without the prior written consent of 3Dlabs. Any unauthorized
assignment or transfer shall be null and void and shall constitute a default,
entitling 3Dlabs to terminate this Agreement under Section 14 above. This
Agreement shall inure to the benefit of and be binding upon any permitted
successor or assign.
17. GOVERNING LAW JURISDICTION AND VENUE. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California. The California state courts of Santa Clara County,
California (or, if there is exclusive federal jurisdiction, the United States
District Court for the Northern District of California) shall have exclusive
jurisdiction and venue over any dispute arising out of or relating to this
Agreement, and Licensee hereby consents to the jurisdiction and venue or such
courts. Licensee shall file any action arising out of or relating to this
Agreement on the appropriate court within one (1) year from the date that such
cause of action accrues.
18. EXPORT REQUIREMENTS. The Software Products, Derivative Software
Products, Documentation and all related technical information or materials are
subject to export controls and are licensable under the U.S. Government export
regulations. Licensee will not export, reexport, divert, transfer or disclose,
directly or indirectly the Software Products, Derivative Software Products,
Documentation and any related technical information or materials without
complying strictly with all legal requirements including without limitation
obtaining the prior approval of the U.S. Department of Commerce. Licensee will
execute and deliver to 3Dlabs such "Letters of Assurance" as may be required
under applicable export regulations. Licensee shall indemnify 3Dlabs against any
loss related to Licensee's failure to conform to these requirements.
19. U.S. GOVERNMENT RESTRICTED RIGHTS. The Software Products and
Documentation are provided with Restricted Rights: use, duplication, or
disclosure by the Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of The Rights in Technical Data and Computer Software
clause at DEARS 252.2277013 or subparagraphs (c)(i) and (2) of the Commercial
Computer Software-Restricted Rights at 48 CFR 52.227-19, as applicable.
20. INTERNATIONAL TRANSACTIONS. If the address of Licensee as set forth
on the first page of this Agreement is outside of the United States or if
Licensee is owned or
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controlled by an entity whose headquarters or principal place of business is
outside of the United States, then the following additional provisions shall
apply:
20.1 This Agreement is in the English language only, which
language shall be controlling in all respects. Any versions of this Agreement in
any other language shall be for accommodation only and shall not be binding upon
either party. All communications and Documentation to be furnished under this
Agreement shall be in the English language.
20.2 The rights and obligations of each party of this
Agreement shall not be governed by the provisions of the U.N. Convention on
Contracts for the International Sale of Goods, but instead the provisions of
section 16 above shall apply.
21. SEVERABILITY. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable, the remaining provisions shall remain in full force and effect.
22. MISCELLANEOUS.
22.1 This Agreement and its exhibits contain the entire
understanding and agreement between the parties respecting the subject matter
hereof and all prior quotations, invoices, negotiations, understandings,
representations and agreements of the parties, whether oral or written, with
respect to the subject of this Agreement are superseded in their entirety.
22.2 This Agreement may not be supplemented, modified,
amended, released or discharged except by an instrument in writing signed by
each party's duly authorized representative.
22.3 This Agreement shall supersede, replace and terminate
in its entirety any purchase order of License for Software Products or
Documentations and all such purchase orders are subject to acceptance by 3Dlabs.
In no event will any additional terms and conditions on a purchase order be
effective unless expressly accepted by 3Dlabs in writing.
22.4 If any action at law or in equity, including an
action for declaratory relief or injunctive relief is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees in addition to any other relief to which
the party may be entitled.
22.5 All captions and headings in this Agreement are for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
22.6 Any waiver by either party of any default or breach
hereunder shall not constitute a waiver of any provision of this Agreement or of
any subsequent default or breach of the same or a different kind.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first set
forth above.
SIGNED for and on behalf of SIGNED for and on behalf of
3Dlabs Inc. (Licensee) AccelGraphics, Inc.
Signed: /s/ Raj Singh Signed: /s/ Nancy E. Bush
--------------------------- ---------------------------
Name: Raj Singh Name: Nancy E. Bush
--------------------------- ---------------------------
Title: Vice President of Sales Title: CFO
--------------------------- ---------------------------
Date: 7/3/96 Date: 7/3/96
--------------------------- ---------------------------
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3DLABS SOFTWARE LICENSE AGREEMENT
EXHIBIT A
SOFTWARE PRODUCTS
The 3Dlabs graphics accelerators products include:
1. GLINT 300SX
2. GLINT Delta
3. GLINT 500 TX
4. PERMEDIA
The Software Products covered under this agreement include:
1. OpenGL demonstration programs (Includes the Rollercoaster,
Chick Berry and X29 programs)
2. OpenGL demonstration programs source (Includes the
Rollercoaster, Chick Berrry and X29 programs)
[* * * * * * *].
<PAGE> 1
EXHIBIT 10.13
OPENGL(TM) LICENSE AGREEMENT
This OPENGL LICENSE AGREEMENT is made the 30th day of June, 1992
between Kubota Pacific Computer, a California corporation having a place of
business at 2630 Walsh Avenue, Santa Clara, CA 95051 ("Licensee"), and Silicon
Graphics, Inc. ("SGI"), a Delaware corporation having a place of business at
2011 North Shoreline Blvd., Mountain View, CA 94039-7311.
WHEREAS, SGI is in the business of designing, manufacturing and
marketing computers and software products, is the author inventor and owner of
the OpenGL(TM) high level programming language for applications using three
dimensional graphics, and desires to grant a license in OpenGL to Licensee;
WHEREAS, Licensee is in the business of designing, manufacturing and
marketing computer products, and desires to be granted a certain level of
license to SGI's OpenGL product;
NOW, THEREFORE, in consideration of the mutual covenant contained
herein, the parties agree as follows:
1.0 DEFINITIONS.
1.1 "AGREEMENT" means this OpenGL(TM) License Agreement.
1.2 "CONFORMANCE CERTIFIED" means the designation that
Licensee may apply to a Derived Program, Licensee has performed the Conformance
Test on such Derived Program and with respect to which Licensee has certified in
writing to SGI that the Conformance Test has fully or partially (in a case where
SGI has granted a test waiver, pursuant to Section 4.2 hereof) executed without
reporting an implementation error. Licensee may only refer to Conformance
Certified Derived Programs as OpenGL Compatible, and may only market such
Derived Programs under the trademark "OpenGL(TM)."
1.3 "CONFORMANCE TEST" means one or more computer programs
supplied by SGI hereunder (as listed on Attachment A) for use in determining
whether Derived Programs are OpenGL Compatible, by indicating whether Licensee
has correctly and completely implemented all portions of the OpenGL API.
1.4 "DERIVED PROGRAM" means a binary (object code) version of
a software program created by compiling (i) Licensee Source, and/or (ii) a
version of an implementation or any portion of SGI Source that Licensee has
modified and/or ported to be compatible with Licensee's Product. The parties
agree and acknowledge that Derived Programs are "derivative works," within the
meaning of such term in the Copyright Act (17 U.S.C., Section 101 et seq.).
<PAGE> 2
1.5 "DESIGNATED SITE" means the location of the Source
Machine(s), which shall be Licensee's address first set forth above, or an
alternative location agreed to in writing by the parties.
1.6 "DISCLOSURE" means a party disclosing information to the
other party under this Agreement.
1.7 "DOCUMENTATION" means any manuals or other literature
(except the Specification) related to OpenGL that SGI provides hereunder.
Documentation shall be listed on Attachment A hereto.
1.8 "EFFECTIVE DATE" means the date first set forth above, on
which date the term of this Agreement shall commence.
1.9 "END USER LICENSE AGREEMENT" means Licensee's standard
from end user software license agreement, which shall contain terms and
conditions that are substantially similar to those set forth in Attachment C
hereto. Attachment C may be an example of Licensee's current end user license
agreement.
1.10 "IMPLEMENTATION" means an embodiment of the OpenGL in SGI
Source form, which SGI may provide hereunder.
1.11 "INFORMATION" means data that concerns a party's business
plans, customers, technology or products, and is confidential, proprietary
and/or a trade secret to, such party.
1.12 "OPENGL" means a collection of procedures, algorithms,
utilities and the like, including window system interfaces, authored, invented
and owned by SGI, that may be implemented as a windowing-system neutral,
application programming interface, which may be used by programmers to define
objects and specify operations involved in rendering and displaying 2- and
3-dimensional graphical images on computers. OpenGL includes but is not limited
to, (i) the Specification, Implementations, and the OpenGL(TM) API, (ii)
associated Conformance Test, interface and communications software, alternate
programming language bindings, (iii) the Protocol Interface Library, and (iv)
Associated Documentation. Any such items appropriate for the license level
specified herein to be licensed and delivered hereunder shall be listed on
Attachment A prior to execution hereof.
1.13 "OPENGL API" means the external application programming
interface to the OpenGL.
1.14 "OPENGL COMPATIBLE" means, with respect to a Derived
Program: any Derived Program that conforms strictly to the Specification, with
the OpenGL API present and functional. A Derived Program that has successfully
completed the Conformance Test shall be deemed to be OpenGL Compatible, for
purposes of this Agreement.
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<PAGE> 3
1.15 "LEVEL I LICENSE" means a license to create Licensee
Source and Derived Programs from the specification and the Protocol Interface
Library, and to distribute and sublicense Conformance Certified Derived Programs
and associated Documentation under SGI's OpenGL(TM) Trademark. Upon payment of
the Level I License fee specified in Attachment A, SGI shall grant to Licensee a
Level I License hereunder.
1.16 "LEVEL II LICENSE" means a license that includes a Level
I License, as set forth in Section 1.15 above, and further provides a license to
possess, port and modify an Implementation and other SGI Source to create
Derived Programs, and to distribute and sublicense Conformance Certified Derived
Programs under SGI's OpenGL(TM) trademark. SGI shall grant a Level II License to
Licensee hereunder only (i) if Level II License rights are designated in Section
3.2 below, and (ii) upon Licensee's payment to SGI of the Level II License Fee
specified in Attachment A.
1.17 "LEVEL III LICENSE" means a license that includes Level I
and Level II Licenses, and further provides a license to distribute SGI Source
modified by Licensee, and Licensee Source, to verified SGI Level II or Level III
Licensees. SGI shall grant a Level III License to Licensee hereunder only (i) if
a Level III License is specified in Section 3.3 below, and (ii) upon Licensee's
payment to SGI of the Level III License Fee specified in Attachment A.
1.18 "LICENSEE'S PRODUCT(S)" means computer hardware and
software products manufactured and/or marketed by Licensee.
1.19 "LICENSEE SOURCE" means any portion of a Source file or
program created by or on behalf of Licensee that embodies any portion of the
OpenGL.
1.20. "PROTOCOL INTERFACE LIBRARY" means SGI Source that
embodies instructions for encoding commands for the OpenGL renderer, for
communication from the client to the server in a client/server implementation of
the OpenGL.
1.21. "RECIPIENT" means a party receiving information from the
other party under this Agreement.
1.22. "REPRESENTATIVE" means an agent, consultant, contract
developer or programmer of SGI or Licensee.
1.23 "SGI SOURCE" means any Source provided by SGI hereunder,
and associated Documentation.
1.24 "SOURCE MACHINE(S)" means one or more computers on which
Licensee stores and uses the SGI Source and the Licensee Source. Each Source
machine is identified by type and serial number Attachment A hereto.
1.25 "SOURCE" means software programs in human readable form,
which must be compiled into a binary form before direct execution on a computer.
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<PAGE> 4
1.26 "SPECIFICATION" means a list and description of the
characteristics and features of the OpenGL, which includes the definition and
description of the implementation of the OpenGL API in an abstract, device
independent state machine for graphics rendering. The Specification is set forth
hereto as Attachment B.
1.27 "TRADEMARKS" means the SGI-owned trademarks OpenGL(TM),
IRIS Graphics Library(TM), GL(TM), and any other trademark, service mark or
trade name that SGI may designate, use or adopt from time to time in connection
with the use, distribution, licensing and marketing of OpenGL, the OpenGL
Specifications, the OpenGL API, Documentation or related products.
2.0 ATTACHMENTS. This Agreement includes the following
attachments, which are incorporated into, and made a part hereof:
(a) Attachment A identifies the Source Machine(s) and lists
the OpenGL items to be provided hereunder,
(b) Attachment B (Specification);
(c) Attachment C (Licensee's End User License Agreement); and
(d) Attachment D (Software Support Agreement) Optional; check
box if included: / /
3.0 LIMITED LICENSES.
3.1 LEVEL I LICENSE. Licensee hereby receives the following
license:
a. Implementation of Derived Programs. SGI hereby grants
to Licensee a limited, non-exclusive, non-transferable, personal, worldwide,
royalty-bearing license to use and modify the information and data contained in
the Specification to create Licensee Source, and to use and modify the Protocol
Interface Library, solely to create Derived Programs.
b. Marketing and Distribution of Conformance Certified
Derived Programs. SGI hereby grants to licensee a limited, non-exclusive,
non-transferable, personal, royalty-bearing worldwide license to duplicate, use
and distribute by sublicense copies of Conformance Certified Derived Programs,
solely under applicable Trademarks and for use with Licensee's Product, provided
that (i) all such copies shall include Trademark, proprietary rights and
copyright notices originally supplied by SGI, (ii) such distribution and
sublicensing shall be strictly in accordance with provisions of Sections 3.4 and
3.5 below, and (iii) Licensee shall pay sublicensing fees to SGI in accordance
with Section 5 below. Licensee hereby represents, covenants and warrants that
(1) under no circumstance shall it provide a Derived Program that has not been
Conformance Certified to any third party, and (2) it will not disclose or
provide any Licensee Source or the Protocol Interface Library to a third party,
except a
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<PAGE> 5
Representative, under any circumstance whatsoever, except as provided in Section
3.3 below.
c. Documentation. SGI hereby grants to Licensee a
limited, non-exclusive, non-transferable, personal, worldwide license to (i)
edit, reformat, rewrite, copy, reissue and create derivative works of
Documentation, (ii) incorporate and copy Documentation into other similar
materials prepared by or for Licensee, and (iii) distribute such Documentation,
including derivative works thereof, solely in connection with its distribution
and marketing of Conformance Certified Derived Programs, and provided that all
such copies shall include Trademark, proprietary rights and copyright notices
originally supplied by SGI.
[X] 3.2 LEVEL II LICENSE. SGI shall grant to Licensee the license set forth in
this Section 3.2 below, only if the box to the left and the "Level II License"
box on the signature page hereof are marked, and upon Licensee's payment of the
Level II License fee specified in Attachment A.
a. Level II License. Under this Level II License, SGI
hereby grants to Licensee the license set forth in Sections 3.1 above, solely in
accordance with the terms and conditions thereof.
b. Limited SGI Source License. SGI hereby grants to
Licensee a limited, non-exclusive, non-transferable, personal, worldwide,
royalty-bearing license to copy, store, process, compile, execute, modify, and
enhance the implementation(s) and other SGI Source, solely on the Source
Machine(s) at Licensee's Designated Site. Such license shall expressly include
the right to modify and port an Implementation to be compatible with Licensee's
Products, and to compile Derived Programs therefrom that Licensee may, in
Conformance Certified versions, sublicense and distribute in accordance with
Sections 3.1(b) above and 3.4 and 3.5 below. In the event that and only while a
Source Machine is not operative, LICENSEE may transfer to and use the SGI Source
on a backup computer at the Designated Site, provided that LICENSEE shall inform
SGI in writing of such transfer, identifying such backup computer, within twenty
(20) days of original transfer, if such transfer continues for longer than
fifteen (15) days. Licensee hereby represents, covenants and warrants that, as a
Level II licensee, it shall not distribute SGI Source or Licensee Source to
anyone, except a representative for any purpose whatsoever.
[ ] 3.3 LEVEL III LICENSE. SGI shall grant to Licensee the license set forth in
this Section 3.3 below, only if the box to the left and the "Level III License"
box on the signature page hereof are marked, and upon Licensee's payment of the
Level III License fee specified in Attachment A.
a. Level III License. Under this Level III License,
SGI hereby grants to licensees the license set forth in Sections 3.1 and 3.2
above, solely in accordance with the terms and conditions thereof.
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<PAGE> 6
b. Distribution of SGI Source and Licensee Source to
Third Parties. SGI hereby agrees that Licensee may distribute copies of SGI
Source and Licensee Source to third parties, including implementations that
Licensee has modified for compatibility with Licensee's Product, provided that
Licensee covenants and warrants that it shall deliver such SGI Source or
Licensee Source to a third party only if such third party is a current licensee
of SGI source, under an agreement that provides sufficient rights to such third
party that it may receive SGI Source and Licensee Source of the level and kind
that Licensee desires to provide. In all such cases, Licensee shall contact SGI
before Licensee's delivery of any SGI Source or Licensee Source, to verify the
foregoing. When Licensee contacts SGI for such verification, SGI shall provide
to Licensee a file, agreement or other identification number so that Licensee
may record such number as its authorization to deliver SGI Source and Licensee
Source to such recipient. When Licensee delivers SGI Source or Licensee Source
under the foregoing circumstances, it shall require that the recipient thereof
sign a written acknowledgment that such Source has been received under and is
subject to the terms and conditions of the SGI source code license agreement
that SGI has identified to Licensee in accordance with this Section 3.3b.
Licensee shall provide a copy of such signed acknowledgment to SGI within ten
(10) days thereafter.
3.4 DISTRIBUTION MECHANISM AND AGREEMENTS. Licensee may
distribute Conformance Certified Derived Programs directly to end-user
sublicensees, or through Licensee's OEMs, VARs or other distributors in the
chain of distribution to end-users, provided that Licensee shall require that
each such distributor enter into a written agreement containing terms and
conditions that are substantially equivalent to, and at least as protective as,
all terms and conditions of this agreement that are applicable to the
distribution and sublicensing of Derived Programs.
3.5 END USER SUBLICENSES. Licensee or its distributor shall
enter an End User License with each sublicensee that Licensee or its distributor
provides with a copy of a Derived Program. The End User License may be
Licensee's standard form agreement, and shall contain terms and conditions that
are substantially equivalent to the terms and conditions in Attachment C. In the
United States, Canada or other locations where copyright laws exist and may be
enforced to protect software, the End User License may be an enforceable,
written agreement that accompanies the package containing such Derived Program
and is fully visible to the sublicensee before the sublicensee opens the
package, which the sublicensee accepts by opening the package, or breaking a
seal. In all other locations, the End User License must be a written agreement
with the sublicensee signs.
3.6 DURATION OF SUBLICENSES. Sublicensees of Licensees may use
the Derived Programs for the term and in the manner provided for the End User
License. The license and obligations of the sublicensee set forth therein are
independent of this Agreement and will survive any termination of the
relationship between Licensee and SGI.
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4.0 TRADEMARK LICENSE AND CONFORMANCE CERTIFICATION.
4.1 CONFORMANCE CERTIFICATION; BETA TEST PROGRAMS. Successful
completion of the applicable version of the Conformance Test is a requirement
for validating that a Derived Program is OpenGL Compatible, and may be
considered Conformance Certified. Licensee shall provide a written report,
signed by a corporate officer of Licensee, showing successful completion of the
Conformance Test, and shall provide to SGI one (1) copy of (i) such Conformance
Test results; (ii) the associated Conformance Certified Derived Programs, and
(iii) the marketing or sales collateral, product documentation and medial labels
which Licensee intends to use to depict or display the applicable Trademarks,
for archival purposes and auditing by SGI's test personnel. SGI may, at its sole
discretion, retain or destroy such copies. Notwithstanding the foregoing, and
anything else to the contrary in this Agreement, Licensee may distribute a
limited quantity of non-Conformance Certified copies of Derived Programs to its
customers for beta test program purposes, provided that (a) such copies are
clearly labeled as "beta" versions of the OpenGL which have not been Conformance
Certified, (b) the term of such beta test programs shall not be longer than
ninety (90) days, after which time Licensee shall require that its customers
return to Licensee all such beta test version copies distributed, and (c)
Licensee shall conduct only one (1) beta test program per major release of its
Derived Programs.
4.2 WAIVER PROCESS. Although SGI has made every reasonable
effort to make the Conformance Test exhaustive, the parties acknowledge that the
Conformance Test may not provide complete (i) coverage of the OpenGL API or (ii)
accuracy in determining that a Derived Program is OpenGL Compatible. In the
event of a conflict between the Specification and the Conformance Test, the
Specification shall prevail. If SGI determines that Licensee should use an
updated version of the Conformance Test in lieu of an earlier version provided
to Licensee, SGI will furnish such updated version to Licensee, under the terms
of this Agreement and at no additional charge to Licensee. SGI agrees that, in
each such instance of the release of an updated version of the Conformance Test,
Licensee may continue to use the previous version of the Conformance test for a
period not to exceed one hundred and twenty (120) days thereafter. However,
Licensee agrees that it shall only use such updated version for any Conformance
Certifications performed by Licensee on any new or revised Derived Programs
released by Licensee thereafter. If SGI releases a further updated version of
the Conformance Test, the aforementioned cycle of use shall again apply to the
two latest versions of the Conformance Test. If Licensee believes that the
Conformance Test erroneously or incompletely tests the OpenGL (pursuant to the
Specification), Licensee may submit a waiver request form detailing such error
to SGI. SGI shall review such request, and render a decision after a thorough
examination. SGI will use reasonable efforts to reply to requests for waivers
within thirty (30) days after receipt thereof. SGI shall notify Licensee in
writing of SGI's approval or denial of each such waiver request. SGI will
maintain a list of approved waivers to the Conformance Test, which list SGI
shall make available to Licensee upon its written request. The waiver request
procedure and forms are available separately from SGI. If SGI grants a waiver,
SGI shall either provide a correct
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<PAGE> 8
Conformance Test to Licensee within thirty (30) days thereafter, or will provide
a written approval to Licensee to release its OpenGL product as "Conformance
Certified with waiver," provided, however, that whenever SGI shall provide a
modified Conformance Test thereafter, licensee shall retest its Derived Program
within thirty (30) days thereafter to determine conformance with same.
4.3 TRADEMARKS LICENSE. On the condition precedent that
Licensee's Derived Program shall have been successfully Conformance Certified at
the applicable level under the Conformance Test, SGI hereby grants to Licensee,
only during the term of this Agreement, and only for that version of the Derived
Program, a limited, non-exclusive license to use Trademarks, solely in
accordance with this Section. This Trademark license applies only to binary
level Conformance Certified Derived Programs, derived from a specific version of
the OpenGL. Licensee shall use Trademarks whenever it distributes and/or markets
a Conformance Certified Derived Program. Licensee will submit any materials
prepared by Licensee that use SGI's name or Trademarks to SGI for approval prior
to release, unless such advertising materials were provided by SGI, or are in
accordance with SGI's trademark use guidelines. SGI reserves the right to reject
(and Licensee will not make use of) any such materials that SGI, in its
reasonable judgment, deems not in accordance with such guidelines or otherwise
potentially injurious to SGI's ownership interest in such Trademarks. Nothing in
this Agreement grants to Licensee any other license, or any title to or interest
in any Trademark, and Licensee agrees that it shall not use a trademark that is
confusingly similar to any Trademark. Licensee will immediately change or
discontinue any Trademark use as requested by SGI. Upon expiration or
termination of this Agreement, Licensee's license to use Trademarks shall
terminate immediately, and Licensee shall cease the use of SGI's name and
Trademarks and destroy all existing literature referencing same.
5.0 FEES; PAYMENT AND DELIVERY.
5.1 LICENSE FEE AND PAYMENT. In consideration of the licenses
granted by SGI hereunder, Licensee agrees to pay to SGI the amount of the
license fee specified on Attachment A. Initial license fees shall be due and
payable immediately upon execution hereof. The license fee so specified is only
for the release of OpenGL that is listed on Attachment A. SGI may make updated
versions of OpenGL available from time to time during the term hereof at
additional charge under a standard support program available from SGI (pursuant
to Attachment D if Licensee elects to purchase SGI's support services) or
separately.
5.2 LICENSE LEVEL UPGRADES. Licensee may at any time, by
written request to SGI, upgrade its license hereunder to a higher level (e.g.,
from a Level I License to a Level II License) for the same version of OpenGL by
paying to SGI the difference between the License fee paid to SGI for Licensee's
then current level license, and the new license level.
5.3 DERIVED PROGRAM DISTRIBUTION FEES AND PAYMENT. Licensee
shall pay to SGI the fee specified on Attachment A for each copy of a Derived
Program
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<PAGE> 9
used, or distributed by or on behalf of Licensee. Licensee shall pay
such distribution fees within forty-five (45) days after the end of each
calendar quarter for copies of Derived Programs put into use or distributed by
or for Licensee during such calendar quarter. Such distribution fee is for the
OpenGL release on which Licensee based the Derived Program. SGI may make updated
versions of the OpenGL and/or related products available from time to time
during the term hereof, and may specify different fees for the distribution of
copies of Derived Programs based on such updated version or other products.
5.4 TAXES AND THE LIKE. License fee payments are net and
exclusive of all taxes, insurance, shipping and other charges. Licensee agrees
to pay or reimburse SGI for all sales, use, value added or other taxes, duties,
importation fees or assessment that SGI incurs with respect to this Agreement
(excluding only taxes based on SGI's income).
5.5 DELIVERY. SGI shall deliver the items specified on
Attachment A in accordance with the delivery schedule thereon. SGI will make any
required media shipments F.O.B. Origin. Risk of loss and/or damage shall pass to
Licensee upon delivery thereof.
6.0 ADDITIONAL OBLIGATIONS OF LICENSEE. Licensee will, in connection
with its marketing and distribution of Derived Programs (i) provide user
documentation for such Derived Programs to its sublicensees, and (ii) make
technical support available to its sublicensees for such Derived Programs.
Licensee is solely responsible for providing software support relating to OpenGL
to its distributors and end user sublicensees, and SGI shall have no
responsibility therefor.
7.0 PROPRIETARY RIGHTS AND CONFIDENTIAL INFORMATION.
7.1 DISCLOSURE OF INFORMATION. Each party agrees that it may
be desirable to disclose to the other party information and/or materials
containing Information. Information also may include confidential, proprietary
and/or trade secret information that is owned by third parties, which third
parties have granted sufficient rights to a party to permit that party to
provide such Information to the other party hereunder. For purposes of this
Section, references to either party shall include any applicable third party
owners/licensors of Information. Licensee agrees that SGI Source, the
Specification and Licensee Source constitute Information of SGI.
7.2 USE OF INFORMATION. Except as otherwise provided in this
Agreement, the parties provide Information hereunder solely for the purpose of
facilitating the relationship described in this Agreement, and the effectuation
of the licenses provided hereunder, and each party agrees (i) not to use any
Information of the other party for any purpose other than the foregoing, (ii) to
limit its disclosure of Information to employees and Representatives as having a
need to know such Information for purposes of this Agreement. Without limiting
the foregoing, Recipient agrees to treat Information of Discloser with at least
the same degree of care and protection that it uses with its own most valuable
confidential information and trade secrets. In a case where Recipient
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provides Information of Discloser to a Representative, Recipient shall require
that such Representative enter a written agreement with Recipient containing
terms and conditions covering the disclosure, use and protection of such
Information that are at least as protective and restrictive as the applicable
terms and conditions of this Section 7.
7.3 EXCLUSIONS. Recipient shall have no obligation as to
Information that (i) is not provided in a tangible form and labeled as
confidential or proprietary, or if provided orally, reduced to writing,
designated as confidential or proprietary; and provided to Recipient within ten
(10) days thereafter, (ii) is known to Recipient at the time of disclosure, as
evidenced by documentation in Recipient's possession at the time of such
disclosure, (iii) Recipient independently develops, provided Recipient can show
that such development was accomplished by or for Recipient without the use of or
any reference to Information, (iv) becomes rightfully known to Recipient from
another source without confidentiality restriction on subsequent disclosure or
use, (v) is or becomes part of the pubic domain through no wrongful act of
Recipient, (vi) Recipient disclosure pursuant to any competently authorized
judicial or governmental request, requirement or order, provided that Recipient
takes reasonable steps to give Discloser sufficient prior notice to contest such
request, requirement or order, or (vii) Discloser furnishes to a third party
without a similar confidentiality restriction on such third party.
7.4 REPRODUCTION OF PROPRIETARY RIGHTS NOTICES. Recipient
shall reproduce and include in all copies of Information prepared by Recipient
the copyright notices and proprietary legends of Discloser as they appear
therein, as furnished to Recipient by Discloser. Recipient shall not remove any
proprietary, copyright, trade secret or other legend or notice from any form of
Information of Discloser. Any copyright notice used in connection with the SGI
Source, Documentation or Specifications shall not be deemed to imply that any
part of such SGI Source, Documentation or Specifications has been published or
has been placed in the public domain, or that the obligation to hold such
Information in confidence pursuant to this Section 7 has been removed in any
other manner.
7.5 CONFIDENTIALITY OF AGREEMENT. The parties agree that they
consider the terms, conditions and prices of this Agreement to be Information.
Further, neither party shall disclose such terms, conditions and pricing to any
third party without the express written permission of the other party, except as
may be required by law or regulation. However, SGI may, at any time and without
notice to Licensee, disclose any portion of any of its standard form agreements
and fees which SGI has incorporated herein to any third party.
7.6 INJUNCTIVE RELIEF. Each party acknowledges and agrees that
an actual or threatened unauthorized use, reproduction, distribution or
disclosure of the Information of the other party would cause irreparable harm
and significant injury to the other party, the degree of which would be
difficult to ascertain, and which would not be compensable by money damages
alone, and, therefore, each party (i) will have the right to enforce the terms
of this Agreement by specific performance and (ii) agrees that in such event the
issuance of an injunction by any court of competent jurisdiction would be an
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appropriate remedy, without prejudice to any other rights and remedies that it
may have for the other party's breach of this Agreement.
7.7 NO OWNERSHIP RIGHTS TRANSFERRED. Licensee receives no
ownership interest in or title to any SGI Intellectual property of any kind,
including, but not limited to, Trademarks, an Implementation, the
Specifications, SGI Source, Licensee Source, Documentation, the OpenGL API,
Derived Programs, or copies of the foregoing, under or pursuant to this
Agreement and/or as a result of a Licensee's (i) possession and use, or (ii)
modification, enhancement, translation, compilation, derivation and the like, of
any of the foregoing under any circumstances whatsoever. SGI shall retain
ownership of the OpenGL, regardless of how Licensee has implemented or used any
portion of the OpenGL in any software programming language, or in any other
manner whatsoever. Notwithstanding the foregoing sentence, nothing in this
Agreement shall be construed to mean that Licensee conveys or transfers any
ownership interest in any software source code of Licensee to SGI hereunder,
provided that such software code (a) does not embody any part of the OpenGL, and
(b) is separable and discrete from SGI Source and Licensee Source.
7.8 DISPOSAL OF MEDIA. Before disposing of any media or
storage apparatus containing Information of the other party, a party will ensure
that it has completely erased or otherwise destroyed any such Information
contained by such media or stored in such apparatus.
7.9 SURVIVAL. The obligations of the parties under this
Section shall survive and continue after any termination of this Agreement or
termination of any license under this Agreement.
8.0 RECORD KEEPING AND REPORTS.
8.1 REPORTS. Licensee agrees to maintain records relating to
its conformance to the terms and conditions of this Agreement, and shall, on the
written request of SGI, made not more often than yearly, prepare and submit a
representation, signed by an officer, that it has met all of its material
obligations under this agreement since Licensee issued the last such report.
8.2 AUDIT. Licensee agrees to allow mutually acceptable
auditors to audit and analyze its relevant records to ensure compliance with all
terms of this Agreement. Licensee shall permit any such audit within fifteen
(15) days after receipt of SGI's written request to audit, during normal
business hours, at a mutually acceptable time. SGI will bear the cost of such an
audit unless the auditor discovers that Licensee has underpaid SGI by at least
ten percent (10%) of fees owned for the audited period, in which case Licensee
shall bear the cost of the audit.
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9.0 PATENT, COPYRIGHT AND TRADEMARK PROTECTION.
9.1 INFRINGEMENT CLAIMS. SGI shall defend any suit or
proceeding brought against Licensee, but only to the extent that such suit or
proceeding is based on a claim that OpenGL, solely as furnished by SGI to
Licensee under this Agreement, constitutes direct infringement of any issued
patent, registered copyright or trademark (provided that such trademark has been
used by Licensee solely in accordance with this Agreement). SGI shall pay or
reimburse Licensee for damages (excluding exemplary damages) and costs finally
awarded therein against Licensee with respect to such matter, provided that
Licensee promptly informs and furnishes SGI with a copy of each communication,
notice or other action relating to the alleged infringement and provides to SGI
all authority, information and assistance necessary to settle, compromise or
litigate such suit or proceeding. Following notice of a claim or of a threatened
or actual suit, SGI may, without obligation to do so, at its sole option, (i)
procure for Licensee the right to continue to use OpenGL as furnished, (ii)
replace or modify same to make it non-infringing, or (iii) discontinue the
license for OpenGL and refund any fees paid for it, less the reasonable value
for use, determined by prorating the fees paid by Licensee for OpenGL based on a
thirty-six (36) month straight line depreciation, applied to the period of
actual possession.
9.2 EXCEPTIONS. SGI shall not be obligated to defend or be
liable for costs and damages if the infringement arises out of: (i) compliance
with Licensee's specifications, (ii) use or combination of OpenGL with software,
hardware or data not provided by SGI, (iii) use of other than the latest
unmodified release of OpenGL made available to Licensee by SGI, or Derived
Program based thereon, if such infringement would have been avoided by using
such release, (iv) a modification of OpenGL made by or for Licensee, or (v) use
of OpenGL after receiving notice, or having reason to believe, that OpenGL
infringes a patent or copyright of a third party, unless Licensee gives prompt
written notice thereof to SGI.
9.3 LIMITATION. THE FOREGOING STATES THE EXCLUSIVE REMEDY OF
LICENSEE AND THE ENTIRE INDEMNITY OF SGI WITH RESPECT TO INFRINGEMENT OF ANY
PATENT, COPYRIGHT OR TRADEMARK BY OPENGL. SGI SHALL HAVE NO LIABILITY WITH
RESPECT TO ANY OTHER PROPRIETARY OR THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
10.0 WARRANTY. SGI warrants that the Implementation, when compiled with
a one hundred percent (100%) ANSI C compatible compiler, will meet the
Specification, in all material respects. EXCEPT AS AFORESAID, SGI PROVIDES
OPENGL ON AN "AS-IS" BASIS ONLY, AND DOES NOT WARRANT OR REPRESENT THAT THE
OPERATION OF OPENGL WILL BE UNINTERRUPTED OR ERROR FREE OR THAT ANY DEFECTS IN
OPENGL ARE CORRECTABLE OR WILL BE CORRECTED. SGI DISCLAIMS ALL WARRANTIES,
EXPRESS, IMPLIED OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
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11.0 LIMITATION OF LIABILITY. EXCEPT FOR MATTERS ARISING OUT OF A
PARTY'S DEFAULT OF SECTION 7 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OF DATA,
INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL, EXEMPLARY, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND WHETHER UNDER THIS AGREEMENT OR OTHERWISE,
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH LOSS. FOR ANY CLAIM CONCERNING
PERFORMANCE OR NONPERFORMANCE BY SGI PURSUANT TO OR IN ANY OTHER WAY RELATED TO
THE SUBJECT MATTER OF THIS AGREEMENT, OR FOR DAMAGES FOR ANY CAUSE WHATSOEVER
AND REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR IN TORT INCLUDING
NEGLIGENCE AND INFRINGEMENT, LICENSEE'S SOLE REMEDY SHALL BE ACTUAL DAMAGES UP
TO THE AMOUNT OF LICENSE FEES FOR THE ITEM AND/OR LICENSE THAT IS THE SUBJECT OF
THE CLAIM.
12.0 TERM OF AGREEMENT. This Agreement and all licenses granted
hereunder shall expire fifteen (15) years after the date first set forth above;
however, it and they also may be terminated earlier as provided below.
13.0 DEFAULT; TERMINATION.
13.1 AUTOMATIC TERMINATION. To the extent permitted by
applicable law, this Agreement and all licenses provided hereunder shall
automatically terminate without notice in the event that Licensee is liquidated
or dissolved.
13.2 DEFAULT. If either party fails to perform any material
obligation under this Agreement, then, upon thirty (30) days prior written
notice specifying such default, the other party may terminate this Agreement,
and all licenses provided hereunder, unless the breach specified in such notice
has been cured during such thirty (30) day period.
13.3 RETURN OF INFORMATION. Upon the termination or expiration
of this Agreement, Licensee shall, within ten (10) days thereafter, deliver to
SGI all Documentation containing SGI Source or Licensee Source, and shall render
unusable all SGI Source or Licensee Source placed in any storage apparatus. The
requirements of this Section 13.3 shall be considered to have been met with
regard to Licensee Source if all portions of OpenGL embodied therein have been
deleted.
13.4 CONTINUING OBLIGATIONS. The parties' rights, duties and
obligations under Sections 5 (FEES, PAYMENT AND DELIVERY), 7 (PROPRIETARY RIGHTS
AND CONFIDENTIAL INFORMATION), 9 (PATENT AND COPYRIGHT PROTECTION), 10 (WARRANTY
EXCLUSION), 11 (LIMITATION OF LIABILITY), 13.4 (Continuing Obligations), 14
(EXPORT), 15.1 (Governing Law) and 15.7 (Notices) shall continue after any
termination or expiration hereof.
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13.5 NO LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES,
ARISING OUT OF OR RELATED TO TERMINATION OF THIS AGREEMENT FOR ANY REASON
WHATSOEVER.
14.0 EXPORT. Licensee understands that OpenGL is subject to regulation
by agencies of the U.S. Government, including the U.S. Department of Commerce,
which prohibits export or diversion of OpenGL to certain countries and parties,
and agrees that Licensee will not knowingly assist or participate in any such
diversion or other violation of applicable U.S. laws and regulations. Licensee
warrants that it will not license or otherwise provide OpenGL to anyone not
approved to receive controlled commodities under applicable U.S. laws and
regulations and that Licensee will abide by such laws and regulations. Licensee
shall hold SGI harmless and indemnify SGI from any breach of this Section 14 by
Licensee or any of its distributors.
15.0 GENERAL
15.1 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California, excluding
its choice of law rules. The parties hereby agree that any dispute regarding the
interpretation or validity of, or otherwise arising out of, this Agreement shall
be subject to the exclusive jurisdiction of the California state courts of Santa
Clara County, California (or, if there is federal jurisdiction, the United
States District Court for the Northern District of California), and the parties
agree to submit to the personal and exclusive jurisdiction and venue of these
courts. The parties hereby expressly waive any right to a jury trial and agree
that any proceeding hereunder shall be tried by a judge without a jury.
15.2 SEVERABILITY. In the event that any one or more of the
provisions of this Agreement shall for any reason be held by a court of
competent jurisdiction to be invalid, inoperative or unenforceable, as applied
to any particular case or under the law any state or of the United States of
America, such circumstances shall not have the effect of rendering the provision
or provisions in question invalid, inoperative or unenforceable in any other
jurisdiction or in any other case or circumstance, or of rendering any other
provision or provisions hereof invalid, inoperative or unenforceable, to the
extent which such provisions are not themselves actually invalid, inoperative or
unenforceable, and this Agreement, and the licenses granted by SGI hereunder, as
the case may be, shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative and unenforceable provision had never been
contained herein, or so that such provisions would be valid, operative and
enforceable, to the maximum extent permitted in such jurisdiction or case.
15.3 ASSIGNMENT. This Agreement and the licenses granted
hereunder are to a specific entity or legal person, which does not include a
Licensee's corporate subsidiaries or affiliates. Licensee may not assign this
Agreement without the prior written consent of SGI, except to a purchaser of
all, or substantially all, of Licensee's assets.
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15.4 NONWAIVER. The failure of either party to enforce at any
time any of the provisions hereof shall not be construed to be a waiver of the
right of such party thereafter to enforce any such provisions, except as
expressly provided herein.
15.5 NO AGENCY. This is a license agreement. No agency,
partnership, joint venture or other joint relationship is created hereby and
neither party has any authority of any kind to bind the other party in any
respect whatsoever.
15.6 FORCE MAJEURE. Except for Licensee's obligations under
Section 5 above, notwithstanding anything else in this Agreement, no default,
delay or failure to perform on the part of either party shall be considered a
breach of this Agreement, if such default, delay, or failure to perform is shown
to be due entirely to causes beyond reasonable control of the party charged with
a default, including, but not limited to, causes such as strikes, lockouts or
other labor disputes, riots, civil disturbances, actions or inactions of
governmental authorities or suppliers, epidemics, war, embargoes, severe
weather, fire, earthquakes, acts of God or the public enemy, nuclear disasters,
supplier delay, or default of a common carrier.
15.7 NOTICES. Notices under this Agreement shall be sufficient
only if mailed by certified or registered mail, return receipt requested, or
personally delivered to the parties at their addresses first set forth above.
Notice by mail shall be deemed received three days after mailing. The parties
shall send notices to the addresses first, set forth above, and notices to SGI
shall be sent to the attention of "Corporate Legal Services."
15.8 SECTION HEADINGS. The parties agree that the Section
and/or paragraph headings used in this Agreement are for reference purposes only
and shall not be used in the interpretation of this Agreement.
15.9 ENTIRE AGREEMENT. This Agreement supersedes all
proposals, oral or written, all negotiations, conversations or discussions
between the parties relating to this Agreement and all past course of dealing
and/or industry custom. Each party acknowledges that it expressly understands
and agrees that (because there are no expectations to the contrary between the
parties) no usage of trade or other regular practice or method of dealing,
either within the computer industry, the software industry or between the
parties shall be used to modify, interpret, supplement or alter in any manner
the express terms of this Agreement or any part hereof.
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One of the following license levels must be checked:
[ ] Level 1 License [X] Level II License [ ] Level III License
SILICON GRAPHICS, INC. LICENSEE
By: /s/ William G. Glazier By: /s/ Steven Melmon
--------------------------------- --------------------------------
William G. Glazier Steven Melmon
- ------------------------------------- ------------------------------------
Name (Print or Type) Name (Print or Type)
Director, MTI Software Licensing Chief Financial Officer
- ------------------------------------- ------------------------------------
Title Title
12/17/92 6/29/92
- ------------------------------------- ------------------------------------
Date Date
Agreement No.:
---------------------
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FIRST AMENDMENT TO OPENGL LICENSE AGREEMENT
AND CONSENT TO ASSIGNMENT
The OpenGL License Agreement (the "Agreement") between Kubota Graphics
Corporation ("KGC", successor in interest to Kubota Pacific Computer, Inc. under
the Agreement) and Silicon Graphics, Inc. ("SGI") dated June 30, 1992 is hereby
modified by the terms and conditions of this First Amendment to the OpenGL
License Agreement and Consent to Assignment (the "First Amendment"). The
capitalized terms in this Amendment shall have the meaning defined in the
Agreement.
WHEREAS, KGC and SGI have entered into the Agreement, and now desire to modify
the Agreement to provide that KGC's license, rights and interest therein be
assigned to a third party;
NOW, therefore, inconsideration of the promises set forth below the parties
agree to the following:
1. SGI hereby consents to the transfer and assignment by KGC of all of KGC's
rights, duties and obligations under the Agreement to AccelGraphics, Inc.
("AccelGraphics"), a California corporation, located at 2630 Walsh Avenue, Santa
Clara, CA 95051-0905, upon KGC's delivery to AccelGraphics of all copies,
regardless of the form of embodiment, of OpenGL (including Source and Derived
Programs) in KGC's possession.
2. AccelGraphics hereby agrees to assume and perform all the obligations and
duties of KGC under the Agreement.
3. In the event of any inconsistency between this Amendment and the Agreement,
the terms and conditions of this Amendment shall prevail, notwithstanding
anything to the contrary in the Agreement. Unless explicitly modified herein,
all terms, conditions and provisions of the Agreement shall continue in full
force and effect.
SILICON GRAPHICS, INC. ACCELGRAPHICS, INC.
By: /s/ H.B. Siegel By: /s/ Jeffrey W. Dunn
------------------------------- ------------------------------
H.B. Siegel Jeffrey W. Dunn
- ----------------------------------- ----------------------------------
Name (Print or Type) Name (Print or Type)
Director of Engineering President and CEO
- ----------------------------------- ----------------------------------
Title Title
1/26/95 2/1/95
- ----------------------------------- ----------------------------------
Date Date
KUBOTA GRAPHICS CORPORATION
By: /s/ P.S. Melman
-------------------------------
P.S. Melman
- -----------------------------------
Name (Print or Type)
CFO
- -----------------------------------
<PAGE> 18
Title
12/31/94
- -----------------------------------
Date
<PAGE> 19
Exhibit 10.13b
SECOND AMENDMENT TO THE OPENGL(R) LICENSE AGREEMENT
The OpenGL License Agreement (the "License Agreement") between AccelGraphics,
Inc. ("Licensee", successor in interest to Kubota Pacific Computer, Inc., Kubota
Corporation and Kubota Graphics Corporation) and Silicon Graphics, Inc. ("SGI"),
dated June 30, 1992, is hereby modified by the terms and conditions set forth in
this Second Amendment, (the "Second Amendment"), dated October 31, 1996.
Capitalized terms used in this Second Amendment shall have the meaning defined
in the License Agreement. Unless explicitly modified herein, all terms,
conditions, and provisions of the License Agreement shall continue unchanged and
in full force and effect.
WHEREAS, Kubota Pacific Computer, Inc. and SGI originally entered into the
Licensee Agreement;
WHEREAS, Kubota Corporation and Kubota Graphics Corporation agreed to assume or
guarantee certain obligations of Kubota Pacific Computer, Inc. under Addendum
Number One to the OpenGL License Agreement;
WHEREAS, Licensee agreed to assume the obligations of Kubota Corporation and
Kubota Graphics Corporation under the First Amendment to OpenGL License
Agreement and Consent to assignment;
WHEREAS Licensee and SGI now desire to modify certain terms of the License
Agreement so that Licensee can develop, market and distribute in binary form an
implementation of OpenGL for the PC platform;
WHEREAS, SGI is developing, together with one or more companies with expertise
in the PC platform, a new implementation of OpenGL for the PC platform and
Licensee is willing to evaluate SGI's implementation of OpenGL for the PC
platform and to consider substituting such implementation for Licensee's
implementation of OpenGL for the PC platform;
NOW, therefore, in consideration of the promises set forth below the parties
agree to the following:
1. [* * * * *] are designed to operate on any PC platform listed on
Exhibit 1 attached to this Second Amendment and which are bundled with
the products listed on Exhibit 1 attached to this Second Amendment.
2. [* * * * *], Licensee agrees to comply with both Section 4.3 of the
License Agreement and with (a) the OpenGL Promotional Guidelines
attached to this Second Amendment as Exhibit 2, (b) the OpenGL Logo
Style Guidelines attached to this Second Amendment as Exhibit 3, and
(c) the OpenGL Trademark Usage Guidelines attached to this Second
Amendment as Exhibit 4. In the event of any conflict between Section
4.3 of the License Agreement and either the OpenGL Promotional
Guidelines, the OpenGL Logo Style Guidelines or the OpenGL Trademark
Usage Guidelines, the foregoing guidelines shall prevail.
<PAGE> 20
3. In the event that SGI elects to provide to Licensee, either directly or
through an authorized distributor, an Implementation developed for use
on a specified PC platform (the "PC Implementation"), Licensee agrees
to evaluate such PC Implementation in good faith pursuant to early
access or beta test agreements with SGI or the authorized distributor,
as appropriate. In the event that Licensee desires to license the PC
Implementation, Licensee and SGI or the authorized distributor, as
appropriate, [* * * * *]:
(a) Be separate and apart from the License Agreement for OpenGL if
SGI determines that an amendment to the License Agreement is
inappropriate;
(b) permit Licensee to substitute and replace the PC
Implementation for any Derived Programs of Licensee which are
designed to operate on the same PC platform as the PC
Implementation;
(c) [* * * * *];
(d) [* * * * *]
(e) include guidelines substantially similar to (i) the OpenGL
Promotional Guidelines attached to this Second Amendment as
Exhibit 2, (ii) the OpenGL Logo Style Guidelines attached to
this Second Amendment as Exhibit 3, and (iii) the OpenGL
Trademark Usage Guidelines attached to this Second Amendment
as Exhibit 4, provided that such guidelines may be modified by
SGI to cover any new trademarks or logos that SGI selects for
the PC Implementation.
4. SGI agrees not to assert a claim for patent infringement against
Licensee under existing and future United States patents owned and
licensable by SGI but only to the extent necessary for Licensee:
(i) to exercise the copyright licenses granted by SGI for
Conformance Certified Derived Programs; and
(ii) to make, use, lease, sell or otherwise transfer any apparatus,
device (including semiconductor device), portion of a system
or system that includes and implements Conformance Certified
Derived Programs.
In no event shall this covenant apply to any apparatus, device, portion
of a system or system that does not include Conformance Certified
Derived Programs even if such apparatus, device, portion of a system or
system is designed to implement Conformance Certified Derived Programs.
5. In the event that Licensee and SGI or an authorized distributor enter
into an agreement for the PC implementation, within thirty (30) days of
the execution thereof SGI and Licensee will jointly issue a press
release in the form mutually agreed upon by the parties.
-2-
<PAGE> 21
SILICON GRAPHICS, INC. ACCELGRAPHICS, INC.
By: /s/ Kurt Akeley By: /s/ Jeffrey W. Dunn
----------------------------- -----------------------------
Kurt Akeley Jeffrey W. Dunn
- --------------------------------- ---------------------------------
NAME (PRINT OR TYPE) NAME (PRINT OR TYPE)
V.P. & Chief Engineer President & CEO
- --------------------------------- ---------------------------------
TITLE TITLE
11/15/96 11/12/96
- --------------------------------- ---------------------------------
DATE DATE
-3-
<PAGE> 22
EXHIBIT 1
APPROVED PC PLATFORMS
Microsoft Windows 95 on:
Intel X86/Pentium
DEC Alpha
Motorola Power
Microsoft Windows NT on:
Intel X86/Pentium
DEC Alpha
Motorola Power PC
-4-
<PAGE> 23
EXHIBIT 2
OPENGL(R) PROMOTIONAL GUIDELINES
1. TRADEMARK USE REQUIREMENTS. Any use by Licensee of Trademarks shall conform
to the then-current version of SGI's OpenGL Trademark Guidelines document and
SGI's Logo Style Guidelines document, both of which SGI shall make available to
Licensee via the World Wide Web page at
http://www.sgi.com/misc/external.list.html. Licensee shall submit to SGI for its
prior written approval any materials of Licensee in which Trademarks are used,
except for time-critical marketing collateral that is on tight deadlines such as
press releases, data sheets, and direct mailers. For such collateral, Licensee
will use the usage-guidelines supplied by SGI but will proceed without obtaining
prior approval (except that press releases which mention SGI will be subject to
prior approval). SGI is free to audit usage of Trademarks on an on-going basis
and, upon request, Licensee will provide SGI with samples of collateral for
purposes of conducting such audits. If SGI determines that Licensee is not using
the Trademarks correctly, SGI has the right to demand prior approval on all
items, including the above mentioned time critical materials. Licensee will then
provide three (3) business days prior notice to SGI on such documents. Licensee
agrees that during these three (3) business days SGI may show cause for
modification of collateral with respect to references to Trademarks. If SGI
chooses not to respond, Licensee will be free to proceed without gaining prior
approval.
2. PRESS RELEASES. Within thirty (30) days after the Effective Date, Licensee
shall issue a press release announcing that Licensee has entered a license
agreement for OpenGL with SGI, and describing Licensee's plans for distribution
and support of OpenGL Compatible products.
3. WORLD WIDE WEB (WWW) SITES.
Licensee shall create and maintain a direct hyperlink from its primary external
WWW site to a web page that features information about Licensee's OpenGL
Compatible product offerings. Such web page shall be consistent in content and
prominence with any other web page of Licensee that includes information
regarding similar products provided by Licensee. Licensee shall further create
and maintain a direct hyperlink from its primary external WWW site to SGI's
OpenGL WWW page at http://www.sgi.com/Technology/OpenGL using the OpenGL 1ogo
specified in SGI's OpenGL Logo Style Guidelines document as the hyperlink
graphic. Alternatively, such link may be provided by Licensee in its OpenGL
related web page. Licensee shall submit to SGI for its prior written approval a
copy of Licensee's proposed WWW OpenGL page.
Licensee agrees and acknowledges that SGI may create a hyperlink from SGI's
OpenGL WWW page to Licensee's OpenGL web page.
4. MARKETING COLLATERAL, DOCUMENTATION AND ADVERTISING MATERIALS. All marketing
collateral, documentation and advertising materials of Licensee related to
Licensee's OpenGL Compatible product, including data sheets, brochures, manuals
and promotion items or the like, shall conform to the then-current version of
SGI's OpenGL Trademark and Logo Style Requirements document where it makes
references to OpenGL.
-5-
<PAGE> 24
5. TRADE SHOWS. Licensee shall prominently display the applicable OpenGL 1ogo in
any trade show booth of Licensee in which Licensee provides information about
Licensee's OpenGL Compatible product.
6. DEVELOPER CONFERENCES. SGI understands that Licensee does not currently offer
developer's conferences. However, if Licensee offers developer's conferences in
the future, Licensee shall offer at least one OpenGL training course during
Licensee's primary developer's conference within one (1) year after beginning
such conferences. SGI will, at Licensee's expense and under mutually acceptable
terms and conditions, assist Licensee in acquiring user training expertise and
materials.
7. PRODUCT PACKAGING. Licensee shall prominently display the OpenGL 1ogo on any
media that Licensee uses to distribute its OpenGL Compatible product, and on any
related packaging materials.
SGI understands that Licensee does not currently prepare external packaging for
its OpenGL Compatible Products. However, if Licensee prepares any packaging for
any of its products that are designed to operate with, or which incorporates,
Licensee's OpenGL Compatible product, all external packaging for such product
shall display the OpenGL 1ogo.
8. PARTICIPATION IN PROMOTIONAL ACTIVITIES. Licensee agrees that SGI may issue
press releases and distribute marketing collateral that include Licensee's name
and OpenGL Compatible product descriptions. SGI agrees to use Licensee's trade
names and trademarks in accordance with Licensee's reasonable written
guidelines, if made available to SGI in advance.
-6-
<PAGE> 25
Exhibit 3
OpenGL(R) Logo Style Guidelines
The attached OpenGL Logo Style Guidelines are current as of the date of the
Agreement to which they are attached. Any use by Licensee of Trademarks shall
conform to the then current version of SGI's Logo Style Guidelines document,
which SGI shall make available to Licensee via the World Wide Web page at
http://www.sgi.com/misc/external.list.html.
-7-
<PAGE> 26
[NEED INSERT GRAPHICS LOGO STYLE PAGES]
-8-
<PAGE> 27
Exhibit 4
OpenGL(R) Trademark Usage Guidelines
The attached OpenGL Trademark Usage Guidelines are current as of the date of the
Agreement to which they are attached. Any use by Licensee of Trademarks shall
conform to the then-current version of SGI's Trademark Usage Guidelines
document, which SGI shall make available to Licensee via the World Wide Web page
at http://www.sgi.com/misc/external.list.html.
-9-
<PAGE> 28
SILICON GRAPHICS, INC.
OPENGL(R) TRADEMARK GUIDELINES
Silicon Graphics' trademarks are the principal means by which Silicon Graphics
identifies itself, its products and activities to the public, and by which the
public, in turn, has come to recognize our company, products and activities. Our
great success is due in part to the favorable recognition we have received under
our company name, and product trademarks such as OpenGL(R), Challenge(R), Indigo
2 TM, MIPS(R), OnyxTM, IRIS(R), and IRIXTM.
To attain this recognition, Silicon Graphics invests considerable resources into
creating, promoting and protecting its trademarks.
As an OpenGL licensee, you must use the OpenGL(R) trademark in accordance with
the following Guidelines, as provided by your license agreement. These
Guidelines are intended to assure proper use of the OpenGL trademark, to
preserve its distinctiveness and enhance its value for our mutual benefit.
1. USE THE OPENGL TRADEMARK IN ITS PROPER FORM.
The OpenGL trademark must always appear as: OpenGL. Leave no space between
"Open" and "GL." The O, G and L must always be capitalized; the p, e, and n in
lower case. Do not display the mark in any unusual typeface, or in any other
manner that might blur its distinctiveness.
2. IDENTIFY THE OPENGL TRADEMARK WITH THE (R) TRADEMARK NOTICE.
The "(R)" trademark notice indicates that the OpenGL trademark is registered
with the U.S. Patent and Trademark Office. As discussed below, always use the
"(R)" with the OpenGL trademark in the OpenGL trademark's first and most
prominent appearance in any material.
Place the "(R)" notice immediately following the OpenGL trademark, without any
space in between the mark and the notice (i.e., OpenGL(R)). Always place the
notice before the generic term that should follow the trademark (e.g., OpenGL(R)
application programming interface), as it acts as a dividing line between the
trademark and the proper name of the product or service to which the mark
relates.
3. USE THE (R) TRADEMARK NOTICE WITH THE TRADEMARK'S FIRST AND/OR MOST PROMINENT
APPEARANCE(S) IN ANY MATERIAL.
To best serve its purpose, the trademark notice must always accompany the
trademark's first and/or most prominent appearance in a document, program, on
packaging, etc. You need not use the notice each time the mark appears
thereafter.
-10-
<PAGE> 29
4. ATTRIBUTE PROPERLY OPENGL, AND ALL OTHER SILICON GRAPHICS TRADEMARKS USED, IN
SEPARATE TRADEMARK ATTRIBUTION SECTION.
Each document in which the OpenGL trademark appears must contain a trademark
attribution sentence identifying OpenGL as a Silicon Graphics registered
trademark as follows:
OpenGL is a registered trademark of Silicon Graphics, Inc.
The notice must also include any other Silicon Graphics trademarks that appear
in the text:
OpenGL, Silicon Graphics, Indigo, and the Silicon Graphics Logo are registered
trademarks, and Challenge and Onyx are trademarks, of Silicon Graphics, Inc.
The attribution sentence should appear below the, document's copyright notice,
typically opposite the title page of a book, or at the end of a dam sheet or
marketing brochure.
5. USE THE OPENGL TRADEMARK ACCURATELY.
As an OpenGL licensee, you must use the OpenGL trademark to indicate accurately
Silicon Graphics' OpenGL technology, specifications, and related products and
services, and/or your products' or services' compliance or compatibility
therewith.
You may not use the trademark for any other purpose. Do not use the trademark to
imply that Silicon Graphics endorses, or is connected with, your company, except
to the extent provided by your OpenGL license agreement with Silicon Graphics.
6. DO NOT USE THE OPENGL TRADEMARK AS PART OF ANY OTHER TRADEMARK OR COMPANY
NAME.
OpenGL licensees may not incorporate the OpenGL trademark into licensees' own
trademarks, service marks, or trade names. This includes both the mark as a
whole, and any portion thereof (such as "GL") that others would associate with
the OpenGL trademark.
Licensees must separate the OpenGL trademark from the licensee's trademark with
wording sufficient to distinguish it clearly. Use it only as an indication of
compatibility, distinct from the licensee's product or company name.
Examples
Incorrect
- - Joe's OpenGL Accelerator(TM)
- - Super Duper OpenGL(TM)
- - OpenGL Master Blaster(TM)
-11-
<PAGE> 30
Correct
- - Joe's Accelerator(TM) for OpenGL(R)
- - Super Duper(TM) for OpenGL(R)
- - Master Blaster(TM) for OpenGL(R)
7. ALWAYS USE THE OPENGL TRADEMARK PROPERLY IN TEXT.
The OpenGL trademark indicates products and services connected with Silicon
Graphics' OpenGL technology. To preserve its distinctiveness and purpose, please
follow the following rules when using the mark in text:
- - Always use the OpenGL trademark as an adjective, not a noun.
- - Never hyphenate the OpenGL trademark.
- - Never pluralize the OpenGL trademark.
- - Never render the OpenGL trademark possessive by use of an apostrophe.
- - Never combine the OpenGL trademark with any other designation.
Examples
Incorrect
- - Acme now offers the OpenGL(R).
- - Bftzplk(TM) is OpenGL-compatible.
- - We harness OpenGL's power.
Correct
- - Acme now offers the OpenGL(R) API.
- - Bftzplk(TM) is compatible with the OpenGL(R) API. or Bflzplk(TM) is OpenGL(R)
API-compatible.
- - We harness the power of OpenGL(R) technology, or We harness the OpenGL(R)
API's power.
8. PLEASE CALL SILICON GRAPHICS WITH ANY QUESTIONS ABOUT THESE GUIDELINES.
Silicon Graphics is happy to assist you with matters addressed by these
GuideLines, or other questions about Silicon Graphics trademarks. Feel free to
contact Silicon Graphics Trademark Counsel Ken Kwartler by phone (415-390-3006)
or mail (Silicon Graphics, 2011 North Shoreline Blvd., Mail stop 18-710,
Mountain View, CA 94039).
Only Silicon Graphics Trademark Counsel can grant authorization for trademark
uses and related issues not in accord with these GuideLines. Silicon Graphics
field offices or other personnel do not have this authority. Accordingly, where
such permission or exceptions are sought, they must be brought to the attention
of Silicon Graphics Trademark Counsel.
-12-
<PAGE> 31
THIRD AMENDMENT TO THE OPENGL(R) LICENSE AGREEMENT
The OpenGL License Agreement (the "License Agreement") between AccelGraphics,
Inc. ("Licensee", successor in interest to Kubota Pacific Computer, Inc., Kubota
Corporation and Kubota Graphics Corporation) and Silicon Graphics, Inc. ("SGI"),
dated June 30, 1992, as amended, is hereby modified by the terms and conditions
set forth in this Third Amendment (the "Third Amendment"), dated December 9,
1996. Capitalized terms used in this Third Amendment shall have the meaning
defined in the License Agreement.
WHEREAS, Kubota Pacific Computer, Inc. and SGI originally entered into the
Licensee Agreement;
WHEREAS, Kubota Corporation and Kubota Graphics Corporation agreed to assume or
guarantee certain obligations of Kubota Pacific Computer, Inc. under Addendum
Number One to the OpenGL License Agreement;
WHEREAS, Licensee agreed to assume the obligations of Kubota Corporation and
Kubota Graphics Corporation under the First Amendment to permit Licensee to
develop, market and distribute in binary form an implementation of OpenGL for
the PC platform; and
WHEREAS, Licensee and SGI agreed to modify the Licensee Agreement under the
Second Amendment to OpenGL License Agreement to permit Licensee to develop,
market and distribute in binary form an implementation of OpenGL for the PC
platform; and
WHEREAS Licensee and SGI now desire to modify certain terms of the License
Agreement so that Licensee can obtain a Level III OpenGL license.
NOW, therefore, in consideration of the promises set forth below the parties
agree to the following:
1. SGI hereby grants to Licensee a Level III License pursuant to Section
3.3 of the License Agreement. Effective as of the date of this Third
Amendment, all terms, conditions, rights and restrictions contained in
Section 3.3 of the License Agreement shall apply to Licensee. For
example Licensee may distribute SGI Source or Licensee Source to Level
II licensees in the manner specified by Section 3.3 of the License
Agreement.
2. [* * * * *].
-13-
<PAGE> 32
3. Unless explicitly modified herein, all terms, conditions, and
provisions of the License Agreement, as amended, shall continue
unchanged and in full force and effect. for example, all requirements
of Section 4.0 (Trademark License and Conformance Certification) as
amended by item 2 of the Second Amendment to OpenGL License Agreement
shall continue to apply.
SILICON GRAPHICS, INC. ACCELGRAPHICS, INC.
By: /s/ David Orton By: /s/ Nancy E. Bush
---------------------------- -------------------------------
David Orton Nancy E. Bush
- -------------------------------- -----------------------------------
NAME (PRINT OR TYPE) NAME (PRINT OR TYPE)
V.P. SGI Chief Financial Officer
- -------------------------------- -----------------------------------
TITLE TITLE
12/17/96 12/10/96
- -------------------------------- -----------------------------------
DATE DATE
-14-
<PAGE> 33
ATTACHMENT A
Agreement No:
License Level:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Per Copy
Distribution
Fee
OpenGL(TM) for Derived
Item Description of Items License Fee Products
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 OpenGL/GL/X Server Protocol/GLU Release 1.0 Specification [* *] [* *]
- ------------------------------------------------------------------------------------------------------------------------------
2 OpenGL GL/X Client Side Library Source Code [* *]
- ------------------------------------------------------------------------------------------------------------------------------
3 OpenGL Sample X Server Extension Source Code [* *]
- ------------------------------------------------------------------------------------------------------------------------------
4 OpenGL Release 1.0 Utility Library Source Code [* *]
- ------------------------------------------------------------------------------------------------------------------------------
5 OpenGL Release 1.0 Hard Copy and Machine Readable Documentation [* *]
- ------------------------------------------------------------------------------------------------------------------------------
6 OpenGL Release 1.0 Compliance Suite Test Source Code [* *]
- ------------------------------------------------------------------------------------------------------------------------------
7 OpenGL Fortran/ADA Binding Source Code [* *]
- ------------------------------------------------------------------------------------------------------------------------------
8 OpenGL Sample Programs [* *]
- ------------------------------------------------------------------------------------------------------------------------------
9 OpenGL Release 1.0 Sample Implementation Source Code [* *]
- ------------------------------------------------------------------------------------------------------------------------------
10 OpenGL Optimization and Porting Guide [* *]
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SOURCE MACHINE(S) SCHEDULE
- -----------------------------------------------------------------------------------------------------------------------------
Source Machine
Item Model Type and Description S/N
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Description of Licensee Products:
Licensee (by/date):
SGI (by/date):
<PAGE> 34
ADDENDUM NUMBER ONE TO THE
OPENGL(TM) LICENSE AGREEMENT
The OpenGL(TM) License Agreement (the "Agreement") between Kubota Pacific
Computer, Inc. ("KPC") and Silicon Graphics, Inc. ("SGI") of even date with this
Addendum Number One ("Addendum") is hereby modified by the terms and conditions
set forth in this Addendum below. Capitalized terms used in this Addendum shall
have the meaning defined in the Agreement. Unless explicitly modified herein,
all terms, conditions and provisions of the Agreement shall continue in full
force and effect.
WHEREAS, KPC and SGI have entered into the above-referenced Agreement;
WHEREAS, the parties have agreed to extend the rights, duties and obligations
under the Agreement to the parent company of KPC, Kubota Corportion ("Kubota"),
a corportion with a place of business at 24-7, Shikitsuhigashi 1-chome,
Naniwa-kuand Kubota Computer, Inc. ("KCI"), a corporation with a place of
business at Osaka 556, JAPAN; 2-8-8 Shinjuku Shinjuki-ku, Tokyo 160 JAPAN.
NOW, therefore, in consideration of the promises set forth below the parties
agree to the following:
1. SGI hereby consents to allow Kubota and KCI to participate in and avail
themselves of all the rights and benefits provided for in the Agreement,
provided that:
(i) Kubota agrees to perform all duties and obligations and observe all
the terms and conditions of the Agreement; and
(ii) KPC and Kubota guarantee KCI's performance of all the duties and
obligations set forth in the Agreement.
2. In the event of any inconsistency between this Addendum and the Agreement,
the terms and conditions of this Addendum shall prevail, notwithstanding
anything to the contrary in the Agreement.
SILICON GRAPHICS, INC. KUBOTA PACIFIC COMPUTER, INC.
By: /s/ William G. Glazier By: /s/ P.S. Melman
------------------------------------- -------------------------------
William G. Glazier P.S. Melman
- ----------------------------------------- -----------------------------------
Name (Print or Type) Name (Print or Type)
Director, MTI Software Licensing CFO
- ----------------------------------------- -----------------------------------
Title Title
12/17/92 6/30/93
- ----------------------------------------- -----------------------------------
Date Date
KUBOTA CORPORATION
By: /s/ Yoshiaki Kuroda
-------------------------------
Yoshiaki Kuroda
-----------------------------------
Name (Print or Type)
General Manager, Office of Computer
-----------------------------------
Business Kubota Corp.
-----------------------------------
Title
-----------------------------------
Date
<PAGE> 1
Exhibit 10.14
BUSINESS LOAN AGREEMENT
Borrower: AccelGraphics, Inc. Lender: Silicon Valley Bank
1942 Zanker Road 3003 Tasman Drive
San Jose, CA 95112 Santa Clara, CA 95054
================================================================================
THIS BUSINESS LOAN AGREEMENT between AccelGraphics, Inc. ("Borrower') and
Silicon Valley Bank ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of October 11, 1995, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
BORROWER. The word "Borrower" means AccelGraphics, Inc. The word
"Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980. as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether
<PAGE> 2
granted directly or indirectly, whether granted now or in the future,
and whether granted in the form of a security interest, mortgage, deed
of trust, assignment, pledge, chattel mortgage, chattel trust, factor's
lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
DEBT. The word "Debt' means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor' means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become barred
by any statute of limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means Silicon Valley Bank, its successors and
assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrowers cash on hand
plus Borrowers receivables.
LOAN. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender, as well as any substitute, replacement
or refinancing note or notes therefor.
-2-
<PAGE> 3
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender,
(b) liens for taxes, assessments, or similar charges either not yet due
or being contested in good faith, (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money security
interests upon or in any property, including, without limitation,
equipment, acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this
Agreement or permitted to be incurred under the paragraph of this
Agreement titled "Indebtedness and Liens"; (e) liens and security
interests which, as of the date of this Agreement, have been disclosed
to and approved by the Lender in writing; and (f) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of
Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or
otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
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CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
Security Agreements granting to Lender security interests in the
Collateral, (c) Financing Statements perfecting Lender's Security
Interests, (d) evidence of insurance as required below; and (e) any
other documents required under this Agreement or by Lender or its
counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender property certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Subject to the Schedule of Exceptions attached
hereto, borrower represents and warrants to Lender, as of the date of this
Agreement, as of the date of each disbursement of Loan proceeds, as of the date
of any renewal, extension or modification of any Loan, and at all times any
Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the state of
Borrower's incorporation and is validly existing and in good standing
in all states in which Borrower is doing business. Borrower has the
full power and authority to own its properties and to transact the
businesses in which it is presently engaged or presently proposes to
engage. Borrower also is duly qualified as a foreign corporation and is
in good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any
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provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any
law, governmental regulation, court decree, or order applicable to
Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws of general
application affecting enforcement of creditor's rights generally, as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq., the Resource Conservation and Recovery
Act, 49 U.S.C., Section 6901, et seq., Chapters 6.5 through 7.7 of
Division 20 of the California Health and Safety Code, Section 25100, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants
that: (a) During the period of Borrower's ownership of the properties,
to the best of Borrower's knowledge, after inquiry, there has been no
use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any person
on, under, about or from any of the properties, (b) Borrower has no
knowledge of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about
or from the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters, (c) Neither Borrower
nor any tenant, contractor, agent or other authorized user of any of
the properties shall use, generate,
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<PAGE> 6
manufacture, store, treat, dispose of or release any hazardous waste or
substance on, under, about or from any of the properties; and any such
activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of the
Agreement. In addition, the provisions of the following sentence shall
apply only if Borrower commences manufacturing activities. Any
inspections or tests made by Lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are
based on Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby (a) releases
and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of
the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release occurring prior to
Borrower's ownership or interest in the properties, whether or not the
same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing.
TAXES. Subject to the Schedule of Exceptions attached hereto, to the
best of Borrower's knowledge, all tax returns and reports of Borrower
that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good
faith in the ordinary course of business and for which adequate
reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and
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assigns, and are legally enforceable in accordance with their
respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws of general application affecting enforcement of creditor's
rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, and (iii) no steps have been
taken to terminate any such plan.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 1942 Zanker Road, San Jose,
CA 95112. Unless Borrower has designated otherwise in writing this
location is also the office or offices where Borrower keeps its records
concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all materialmen
adverse changes in Borrower's financial condition, and (b) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
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<PAGE> 8
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrowers books and
records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in
no event later than ninety (90) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and,
as soon as available, but in no event later than thirty (30) days after
the end of each month. Borrower's balance sheet and profit and loss
statement for the period ended, prepared and certified as correct to
the best knowledge and belief by Borrower's chief financial officer or
other officer or person acceptable to Lender. All financial reports
required to be provided under this Agreement shall be prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, aging of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the covenants and ratios
set forth in the paragraph labeled "Financial Covenants." Except as
provided therein, all computations made to determine compliance with
the requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
FINANCIAL COVENANTS. Borrower shall maintain, on a monthly basis,
beginning with the period ended September 30, 1995, a minimum quick
ratio of 2.00 to 1.00; a minimum tangible net worth of $3,200,000.00
plus 80% of quarterly net profit after taxes (exclusive of losses) plus
100% of new equity; and a maximum total debt minus subordinated debt to
tangible net worth plus subordinated debt ratio of 1.00 to 1.00.
Furthermore, losses shall be limited as follows: For the quarter ended
September 30, 1995, a maximum loss of $800,000.00; for the quarter
ending December 31, 1995, a maximum loss of $600,000.00; and, for the
quarter ending March 31, 1996, a maximum loss of $100,000.00. Borrower
shall achieve profitability, on a quarterly basis, beginning with the
quarter ending June 30, 1996.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies reasonably acceptable to Lender. Borrower,
upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days' prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person. In
connection with all
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<PAGE> 9
policies covering assets in which Lender holds or is offered a security
interest for the Loans. Borrower will provide Lender with such loss
payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy. In addition, upon request of Lender (however not more often
thin annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral. The cost of such appraisal shall
be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality of the
same shall be contested in good faith by appropriate proceedings, and
(b) Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment of
the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at
any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or
profits.
PERFORMANCE. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in
a timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under
this Agreement or under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct
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its business affairs in a reasonable and prudent manner and in
compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance
with the Americans With Disabilities Act and with all minimum funding
standards and other requirements of ERISA and other laws applicable to
Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books,
accounts, and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of
any records it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender monthly within thirty (30) days and at the time of each
disbursement of Loan proceeds with a certificate executed by Borrower's
chief financial officer, or other officer or person acceptable to
Lender, certifying that the representations and warranties set forth in
this Agreement are true and correct as of the date of the certificate
and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender.
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INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, other than equipment or capital leases, (b) except as allowed as
a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease,
grant a security interest in, or encumber any of Borrower's assets, or
(c) sell with recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity (except, so long as Borrower is in
compliance with, and following any such action, would remain in
compliance with, all other terms of this Agreement, such acquisitions
that do not involve an amount that in the aggregate exceeds $200,000
during the term of this Agreement), change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that notwithstanding
the foregoing, but only so long as no Event of Default has occurred and
is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal
Revenue Code of 1986, as amended), Borrower may pay cash dividends on
its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income
tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of stock of Borrower,
or (d) purchase or retire any of Borrower's outstanding shares or alter
or amend Borrower's capital structure, except for repurchases or
employees and/or consultants shares of Common Stock in accordance with
the provisions of such persons restricted stock purchase agreement;
provided, however, that such repurchases shall not in the aggregate
exceed $500,000.00 in any fiscal year.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity (except, so long as Borrower is in
compliance with, and following any such action, would remain in
compliance with, all other terms of this Agreement, such acquisitions
that do not involve an amount that in the aggregate exceeds $200,000
during the term of this Agreement), or (c) incur any obligation as
surety or guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender, (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or
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(d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such Guarantor's guaranty of the Loan or any other loan with Lender.
LOAN ADVANCES. Lender, in its discretion, will make loans to Borrower, in
amounts determined by Lender, up to the amounts as defined and permitted in this
Agreement and Related Documents, including but not limited to any Promissory
Notes, executed by Borrower (the "Credit Limit"). Borrower is responsible for
monitoring the total amount of Loans and Indebtedness outstanding from time to
time, and Borrower shall not permit the same, at any time to exceed the Credit
Limit. If at any time the total of all outstanding Loans and Indebtedness
exceeds the Credit Limit, Borrower shall immediately pay the amount of the
excess to Lender, without notice or demand.
DEFAULT RATE. Upon default, including failure to pay upon final maturity,
Lender, at its option, may do one or both of the following: (a) increase the
variable interest rate on this Note to five percentage points (5.000%) over the
Interest Rate otherwise payable thereunder, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid at
the rate provided in the Note.
BORROWING BASE FORMULA. Funds shall be advanced under the line of credit
according to a borrowing base formula, as determined by Lender, defined as
follows: The lesser of (i) $2,000,000.00 or (ii) Seventy-Five percent (75%) of
eligible accounts receivable minus the face amount of all outstanding letters of
credit (including drawn but unreimbursed letters of credit). Eligible accounts
receivable shall include, but not be limited to, those accounts outstanding less
than 90 days from the date of invoice, excluding foreign, government, contra,
and intercompany accounts; and exclude accounts wherein 50% or more of the
account is outstanding more than 90 days from the date of invoice. Any accounts
which alone exceed 25% of total accounts will be ineligible to the extent said
account exceeds 25% of total accounts. Also exclude any credit balances which
are aged past 90 days. Also ineligible are any accounts which Lender in its sole
judgment excludes for valid credit reasons. Notwithstanding the foregoing,
Lender may, in its sole discretion, deem certain foreign accounts eligible in
the Borrowing Base Formula. Lender will notify Borrower of such eligibility
prior to Borrower including such accounts in the Borrowing Base Formula.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. Provide to Lender not later than
fifteen (15) days after and as of the end of each month, with a Borrowing Base
Certificate and aged lists of accounts receivable and accounts payable. Lender
shall conduct an initial accounts receivable audit of Borrower's books and
records. In the event Borrower does not borrow within the first six months of
the Loan term, a secondary audit shall be completed not later than thirty (30)
days prior to any borrowing. Otherwise, audits will be performed on a
semi-annual basis, Borrower's deposit account will be debited for the audit
expense and a notification will be mailed to Borrower.
WARRANTS. Borrower shall issue to Lender a Warrant to purchase 40,000 shares of
Borrower's Series A Preferred stock with an exercise price of $1.25 per share.
The underlying Series A Preferred stock shall be subject to antidilution price
protection and registration rights.
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The Warrant shall be subject to net exercise provisions. The Warrant shall be on
Lender's standard form and shall be for a term of 5 years.
LETTER OF CREDIT SUBLIMIT. Subject to the terms and conditions of this Agreement
as may be amended, Borrower shall issue or cause to issue under the Note standby
and commercial letters of credit for the account of Borrower in amounts not to
exceed $1,000,000.00. Each such letter of credit shall have an expiry date of no
later than the maturity date of the line of credit being executed herewith. All
such letters of credit shall be, in form and in substance, acceptable to Lender,
and shall be subject to Lenders form of letter of credit application.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower, which is not cured within ten (10) days.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing
-13-
<PAGE> 14
the Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower without Lender's consent,
which shall not be unreasonably withheld.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or a material impairment in the value or priority
of Lender's security interest occurs.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Santa Clara County, the State of California. Lender and
Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here /s/ Nancy Bush) This Agreement shall
be governed by and construed in accordance with the laws of the State
of California.
-14-
<PAGE> 15
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of
any such participation interests will be considered as the absolute
owner of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the
sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against
Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification
and collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower agrees to keep
Lender informed at all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render
-15-
<PAGE> 16
that provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or
validity; however, if the offending provision cannot be so modified, it
shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and affiliates
of Borrower. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to
make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lenders right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shill not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
-16-
<PAGE> 17
BORROWER ACKNOWLEDGE SHAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
OCTOBER 11, 1995.
BORROWER:
AccelGraphics, Inc.
By: /s/ Nancy E. Bush
_____________________________________
Name: Nancy E. Bush
___________________________________
Title: CFO
__________________________________
LENDER:
Silicon Valley Bank
By: /s/ Michael J. Rose
_____________________________________
Name: Michael J. Rose
___________________________________
Title: Corporate Banking Officer
__________________________________
-17-
<PAGE> 1
EXHIBIT 11.1
ACCELGRAPHICS, INC.
COMPUTATION OF PRO FORMA NET LOSS PER SHARE (1)(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Net loss $(932)
======
Pro forma weighted average shares outstanding:
Common Stock .................................................. 1,134
Common Stock issuable upon exercise of options granted
through February 7, 1996 (3) ................................ -
Common Stock issuable upon exercise of options and warrants
granted after February 7, 1996 (4) .......................... 629
Mandatorily Redeemable Convertible Preferred Stock (5) ........ 4,509
------
Pro forma weighted average shares outstanding ................... 6,272
======
Pro forma net loss per share .................................... $(0.15)
======
</TABLE>
- -------------------
(1) This exhibit should be read in conjunction with Note 1 of Notes to
Consolidated Financial Statements.
(2) Share and per share data adjusted to reflect the 1-for-2 reverse stock
split. See Note 1 of Notes to Consolidated Financial Statements.
(3) Stock options granted through to February 7, 1996 are excluded as their
effect is anti-dilutive.
(4) Stock options granted after to February 7, 1996 (using the treasury stock
method and an assumed initial offering price of $11 per share) have been
included for all periods presented.
(5) Mandatorily redeemable convertible preferred stock (using the if converted
method) is included for all periods presented, as it converts
automatically upon consummation of the offering.
<PAGE> 1
Exhibit 21.1
Subsidiaries of Registrant
Subsidiary Jurisdiction
- ---------- ------------
AccelGraphics Deutschland California
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,979
<SECURITIES> 0
<RECEIVABLES> 4,887
<ALLOWANCES> 495
<INVENTORY> 507
<CURRENT-ASSETS> 7,927
<PP&E> 898
<DEPRECIATION> (386)
<TOTAL-ASSETS> 8,439
<CURRENT-LIABILITIES> 2,897
<BONDS> 1,782
8,930
0
<COMMON> 786
<OTHER-SE> (5,956)
<TOTAL-LIABILITY-AND-EQUITY> 8,439
<SALES> 18,671
<TOTAL-REVENUES> 18,671
<CGS> 12,077
<TOTAL-COSTS> 12,077
<OTHER-EXPENSES> 7,429
<LOSS-PROVISION> 450
<INTEREST-EXPENSE> 145
<INCOME-PRETAX> (932)
<INCOME-TAX> 0
<INCOME-CONTINUING> (932)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (932)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
