AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1997
----------------
DELAWARE 3674 77-0449233
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
2465 LATHAM STREET
MOUNTAIN VIEW, CA 94040
(415) 903-3800
|
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPIES TO:
RICHARD J. CHAR, ESQ. GORDON K. DAVIDSON, ESQ.
GAIL C. HUSICK, ESQ. EILEEN DUFFY ROBINETT, ESQ.
J. MICHAEL ARRINGTON, ESQ. JEFFERY L. DONOVAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI FENWICK & WEST LLP
PROFESSIONAL CORPORATION TWO PALO ALTO SQUARE
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94306
PALO ALTO, CALIFORNIA 94304 (415) 494-0600
(415) 493-9300
----------------
|
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 145 under the Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
Common Stock, $.001 par value per share... $34,500,000 $10,455
|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE + +WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE + +SECURITIES LAWS OF ANY SUCH JURISDICTION. + |
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS (Subject to Completion) Issued March 6, 1997
Shares
[RAMBUS LOGO]
RAMBUS INC.
COMMON STOCK
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL
PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND $ PER SHARE. SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED IN
DETERMINING THE INITIAL PUBLIC OFFERING PRICE. APPLICATION HAS
BEEN MADE TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON
THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "RMBS."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 6 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE $ A SHARE
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
Per Share................................... $ $ $
Total(3).................................... $ $ $
|
The Shares are offered, subject to prior sale, when, as and if accepted by the Underwriters named herein and subject to approval of certain legal matters by Fenwick & West LLP, counsel for the Underwriters. It is expected that delivery of the Shares will be made on or about , 1997, at the office of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in immediately available funds.
MORGAN STANLEY & CO.
Incorporated
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
, 1997
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary....................................................... 4
The Company.............................................................. 5
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 29
Management............................................................... 43
Certain Transactions..................................................... 52
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 58
Shares Eligible for Future Sale.......................................... 64
Underwriters............................................................. 66
Legal Matters............................................................ 68
Experts.................................................................. 68
Additional Information................................................... 68
Index to Consolidated Financial Statements............................... F-1
|
The Company intends to furnish to its stockholders annual reports containing consolidated financial statements audited by its independent auditors and quarterly reports containing unaudited consolidated financial data for the first three quarters of each fiscal year.
RDRAM and the Rambus logo are registered trademarks, and Rambus, RAC, Rambus Channel, RModule and RSocket are trademarks of the Company. This Prospectus also includes product names and other trade names and trademarks of the Company and of other organizations.
Unless otherwise indicated, the information in this Prospectus: (i) gives effect to the conversion of all outstanding shares of Preferred Stock into shares of Common Stock upon completion of this offering and (ii) does not give effect to exercise of the Underwriters' over-allotment option.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
Rambus Inc. ("Rambus" or the "Company") designs, develops, licenses and markets high-speed chip-to-chip interface technology to enhance the performance and cost-effectiveness of consumer electronics, computer systems and other electronic systems. The Company licenses semiconductor companies to manufacture and sell memory and logic ICs incorporating Rambus interface technology and markets its solution to systems companies to encourage them to design Rambus interface technology into their products. The Company's technology cost- effectively increases the data transfer rate or "memory bandwidth," allowing semiconductor memory devices to keep pace with faster generations of processors and controllers, and thus supports the accelerating data transfer requirements of multimedia and other high-bandwidth applications.
The high-speed interface technology Rambus has developed is applicable to data transfer between most semiconductor chips. The Company has initially chosen to concentrate the application of its technology on the interface between logic ICs and memory devices because of the acute performance needs and the relevant market sizes. The Company believes that the systems which will best utilize the high bandwidth provided by current Rambus technology are the relatively high-volume, low-cost systems in which the cost of the memory subsystems represents a significant portion of the selling price. To date, the principal applications for the Company's technology have been in the consumer multimedia, PC multimedia and workstation multimedia markets. These areas accounted for the sale of approximately $13,000, $11 million, and $444 million of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996, respectively. Systems companies utilizing Rambus technology in these multimedia markets include Nintendo, Silicon Graphics, Chromatic Research and Creative Labs. The Company's licensees include Cirrus Logic, Hitachi, Hyundai Electronics, IBM, LG Semicon, LSI Logic, NEC, Oki Electric Industry, Samsung Electronics, SGS-THOMSON and Toshiba. Other applications currently being developed for Rambus technology include multifunction peripheral controllers for combination fax/copier/scanner/laser printer devices, and networking equipment such as high-speed ethernet switches. In addition, the Company and Intel Corporation have entered into a development and license agreement and are working together to develop an extension of the Rambus interface technology optimized for the PC main memory market segment.
THE OFFERING
Common Stock offered........ shares
Common Stock to be outstand-
ing after the offering..... shares(1)
For general corporate purposes, including working
Use of proceeds............. capital and capital expenditures
Proposed Nasdaq National
Market symbol.............. RMBS
|
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- --------- ---------
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA: (UNAUDITED)
Total revenues.......... $ 1,916 $ 3,371 $ 5,000 $ 7,364 $11,270 $ 2,510 $ 5,491
Total costs and
expenses............... 7,663 9,333 11,197 13,417 15,838 3,666 5,388
Operating income
(loss)................. (5,747) (5,962) (6,197) (6,053) (4,568) (1,156) 103
Net income (loss)....... (6,594) (6,336) (6,629) (7,020) (4,415) (1,126) 92
Pro forma net income
(loss) per share(2).... $ (0.25) $ 0.01
Pro forma shares used in
per share
calculations(2)........ 17,432 20,018
|
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
CONSOLIDATED BALANCE
SHEET DATA: (UNAUDITED)
Cash, cash equivalents
and marketable
securities............. $ 10,928 $
Total assets............ 18,703
Total debt(4)........... 1,932
Stockholders' deficit... (11,657)
|
THE COMPANY
Rambus designs, develops, licenses and markets high-speed chip-to-chip interface technology to enhance the performance and cost-effectiveness of consumer electronics, computer systems and other electronic systems. The Company licenses semiconductor companies to manufacture and sell memory and logic ICs incorporating Rambus interface technology and markets its solution to systems companies to encourage them to design Rambus interface technology into their products. The Company's technology cost-effectively increases the data transfer rate, or "memory bandwidth," allowing semiconductor memory devices to keep pace with faster generations of processors and controllers and thus supports the accelerating data transfer requirements of multimedia and other high-bandwidth applications.
The performance of a computer or other electronic system is typically constrained by the speed of its slowest element. In the past, that element was the logic IC that controlled the system's specific functions and performed calculations--the microprocessor. In recent years, however, new generations of microprocessors have become substantially faster and more powerful, and increasingly the bottleneck in system performance is becoming the component that stores the instructions and data needed by the microprocessor--the DRAM. Since 1980, the typical operating frequency of Intel and other mainstream microprocessors has increased approximately 40 times from 5 MHz (million cycles per second) to 200 MHz. During this same period, the typical operating frequency of DRAMs has increased by approximately ten times. This growing disparity between the frequency of microprocessors and DRAMs is termed the "Performance Gap."
Rambus has created a revolutionary chip-to-chip interface architecture, which allows data to be transferred through a simplified bus at significantly higher frequencies than permitted by conventional technologies. Rambus has focused the application of its interface technology on the Performance Gap and licenses its interface technology to memory and logic semiconductor manufacturers, which incorporate this interface technology into their IC designs to supply systems companies with Rambus ICs. The key elements of the Rambus interface are Rambus-based DRAMs ("RDRAMs"), Rambus ASIC cells ("RACs") and the interconnecting circuitry known as the "Rambus Channel." While Rambus technology can be used to address a wide variety of chip-to-chip data transfer requirements, the largest immediate application is to connect logic circuits to memory in home video games, PCs, workstations and other electronic systems.
To date, the principal applications for the Company's technology have been in the consumer multimedia, PC multimedia and workstation multimedia markets. These areas accounted for the sale of approximately $13,000, $11 million, and $444 million of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996, respectively. Systems companies utilizing Rambus technology in these multimedia markets include Nintendo, Silicon Graphics, Chromatic Research and Creative Labs. The Company's licensees include Cirrus Logic, Hitachi, Hyundai Electronics, IBM, LG Semicon, LSI Logic, NEC, Oki Electric Industry, Samsung Electronics, SGS-THOMSON and Toshiba. Other applications currently being developed for Rambus technology include multifunction peripheral controllers for combination fax/copier/scanner/laser printer devices, and networking equipment such as high-speed ethernet switches. In addition, the Company and Intel Corporation have entered into a development and license agreement and are working together to develop an extension of the Rambus interface technology optimized for the PC main memory market segment.
The Company was incorporated in California in March 1990 and reincorporated in Delaware in March 1997. The Company's principal executive offices are located at 2465 Latham Street, Mountain View, CA 94040. Its telephone number is (415) 903-3800. The Company's home page can be located on the Internet at http://www.rambus.com. Information contained on the Company's Web site does not constitute part of this Prospectus.
RISK FACTORS
In addition to the other information in this Prospectus, the following factors should be considered carefully in evaluating an investment in the shares of Common Stock offered hereby. This Prospectus contains forward- looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in such forward- looking statements. Factors that may cause such a difference include, but are not limited to, those discussed below and in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Unpredictable and Fluctuating Operating Results. Because many of the Company's revenue components fluctuate and are difficult to predict, and its expenses are largely independent of revenues in any particular period, it is difficult for the Company to accurately forecast revenues and profits or losses. Historically, contract revenues have represented the largest portion of the Company's revenues. The Company recognizes contract revenues ratably over the period during which post-contract customer support is expected to be provided. While this means that contract revenues from current licenses are relatively stable, accurate prediction of revenues from new licenses is difficult because the development of a business relationship with a potential licensee is a lengthy process, frequently spanning a year or more, and the fiscal period in which a new license agreement will be entered into, if at all, and the financial terms of such an agreement are difficult to predict. In addition to license fees, contract revenues include fees for engineering services, which are dependent upon the varying level of assistance desired by licensees and, therefore, the revenue from these services is also difficult to predict. Adding to the complexity of making accurate financial forecasts is the fact that certain expenses associated with a particular contract are typically front-end loaded, except for expenses associated with upgrades and enhancements, whereas contract fees associated with that contract are recognized ratably over the period during which the post-contract customer support is expected to be provided.
The Company believes that royalties will represent an increasing portion of total revenue in future periods, which may add to the difficulty in making accurate financial forecasts. Such royalties (other than nonrefundable prepaid royalties) are recognized in the quarter in which the Company receives a report from a licensee regarding the shipment of Rambus ICs in the prior quarter, and are dependent upon fluctuating sales volumes and prices of chips containing Rambus technology, all of which are beyond the Company's ability to control or assess in advance. A few contracts include nonrefundable prepaid royalties, which are recognized ratably over the period during which post- contract customer support is expected to be provided, and are not related to the actual rate at which Rambus ICs are shipped by the licensee. Accordingly, the amount of nonrefundable, prepaid royalties recognized in a period is not necessarily representative of the rate at which the nonrefundable, prepaid royalties are being offset by royalties earned on shipments made. The Company believes that its continued success will be substantially dependent upon royalties increasing at a rate which more than offsets decreases in the recognition of deferred revenue under existing contracts as their recognition periods expire, as well as the Company's ability to add new licensees and to license new generations of its technology to its existing licensees. Because a systems company can change its source of Rambus ICs at any time, and because the new Rambus license source could have a considerable nonrefundable, prepaid royalty balance as well as different royalty rates, any such change by a systems company, particularly one which accounts for substantial volumes of Rambus ICs, could have a sudden and significant adverse effect on the Company's revenues.
The Company's business is subject to a variety of additional risks that could materially adversely affect quarterly and annual operating results, including market acceptance of the Company's technology; systems companies' acceptance of Rambus ICs produced by the Company's licensees; market acceptance of the products of systems companies which have adopted the Company's technology; the loss of any strategic relationships with systems companies or licensees; announcements or introductions of new technologies or products by the Company or the Company's competitors; delays or problems in the introduction or performance of enhancements or future generations of the Company's technology; fluctuations in the market price and demand for DRAMs and logic ICs into which the Company's technology has been incorporated; competitive pressures resulting in lower contract revenues or royalty rates; changes in the Company's and system companies' development schedules and levels of expenditure on research and development; personnel changes, particularly those
involving engineering and technical personnel; costs associated with protecting the Company's intellectual property; changes in Company strategies; foreign exchange rate fluctuations or other changes in the international business climate; and general economic trends and other factors.
The Company has granted to Intel Corporation a warrant for the purchase of 1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The warrant will become exercisable only upon the achievement of certain milestones, which will result in a charge to the statement of operations at the time achievement of the milestones becomes probable for the excess of the then fair value of the warrant over the exercise price.
In future quarters, the Company's operating results may not meet the expectations of public market analysts or investors. In such an event, the market price of the Common Stock would be materially adversely affected. See "--Dependence upon Limited Number of Licensees," "--Dependence upon Systems Companies," "--No Assurance of Adoption of Rambus Technology as an Industry Standard" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
History of Losses; No Assurance of Profitability. As of December 31, 1996, the Company's accumulated deficit was approximately $34.4 million. While the Company generated net income for the first time in the quarter ended December 31, 1996, it incurred significant losses in each quarter of fiscal 1996 and in each quarter of its prior fiscal years. There can be no assurance that in the future the Company will be profitable on a quarterly or annual basis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Dependence upon Limited Number of Licensees. The Company neither manufactures nor sells devices containing its interface technology. Rather, the Company licenses its technology to semiconductor companies which in turn manufacture and sell Rambus ICs to systems companies which incorporate Rambus technology into their products. The Company's strategy to become an industry standard is dependent upon the Company's ability to make its technology widely available to systems companies through multiple semiconductor manufacturers, and there can be no assurance that the Company will be successful in maintaining its relationships with its current licensees or in entering into new relationships with additional licensees. The Company faces numerous risks in successfully obtaining licensees on terms consistent with the Company's business model, including, among others, the lengthy and expensive process of building a relationship with a potential licensee before there is any assurance of a license agreement with such party; persuading large semiconductor companies to work with, to rely for critical technology on, and to disclose proprietary manufacturing technology to, a smaller company such as Rambus; persuading potential licensees to bear certain development costs associated with Rambus technology and to make the necessary investment to successfully produce Rambus ICs; and successfully transferring technical know- how to licensees. In addition, there are a relatively limited number of larger semiconductor companies to which the Company could license its interface technology in a manner consistent with its business model. The Company believes that its principal competition may come from its licensees and prospective licensees, many of which are evaluating and developing products based on alternative technologies. See "--Competition" and "Business--Rambus Licensees."
Dependence upon Systems Companies. Although sales of Rambus ICs to systems companies which have adopted the Company's technology for their products are not made directly by the Company, such sales directly affect the amount of royalties received by the Company. Therefore, the Company's success is substantially dependent upon the adoption of the Company's interface technology by systems companies, particularly those which develop and market high-volume business and consumer products such as home video games and PCs. The Company is subject to many risks beyond its control that influence the success or failure of a particular systems company, including among others competition faced by the systems company in its particular industry; market acceptance of the systems company's products; the engineering, sales and marketing and management capabilities of the systems company; technical challenges unrelated to Rambus technology faced by the systems company in developing its products; and the financial and other resources of the systems company. The process of persuading systems companies to adopt the Company's technology can be lengthy and, even if adopted, there can be no assurance that the Rambus technology will be used in a product that is ultimately brought to market,
achieves commercial acceptance or results in significant royalties to the Company. Rambus must dedicate substantial resources to market to and support systems companies, in addition to supporting the sales and marketing and technical efforts of its licensees in promoting Rambus technology to systems companies. To date, the Company has not charged systems companies for technical support. Because the Company does not control the business practices of its licensees, it has no ability to establish the prices at which its technology is made available to systems companies or the degree to which its licensees promote Rambus technology to systems companies. See "Business--The Rambus Solution," "--Target Markets and Applications" and "--Rambus Business Model and Strategy."
No Assurance of Adoption of Rambus Technology as an Industry Standard. An important part of the Company's strategy to become an industry standard is to penetrate new markets by targeting leaders in those markets. This strategy is designed to encourage other participants in those markets to follow such leaders in adopting Rambus technology. Should a high profile industry participant adopt Rambus technology for one or more of its products but fail to achieve success with those products, other industry participants' perception of Rambus technology could be adversely affected. Any such event could reduce future sales of Rambus ICs. Likewise, were a market leader to adopt and achieve success with a competing technology, the Company's reputation and sales could be adversely affected. In addition, some industry participants have adopted, and others may in the future adopt, a strategy of disparaging the Rambus solution adopted by their competitors. See "-- Competition", "Business--Target Markets and Applications" and "--Competition."
Future Dependence upon PC Main Memory Market Segment and Intel. An important part of the Company's strategy is to penetrate the market for PC main memory segment. Rambus believes that PC main memory currently accounts for approximately one-half of all DRAMs sold. In November 1996, Rambus signed a development and license contract with Intel Corporation which provides for the parties to cooperate in the development of a specification for an extension of the RDRAM optimized for PC main memory applications. The contract also calls for Intel to use reasonable best efforts to develop a PC main memory controller designed for use with such RDRAMs. The anticipated development period for the new RDRAM technology is at least two years and there are a number of technological issues which must be successfully resolved prior to implementation. There can be no assurance that Intel will successfully develop a controller for use with RDRAMs in time to meet market requirements, or at all. Under the contract, Intel can terminate its relationship with Rambus at any time. Even if such development efforts are completed, there is no assurance that RDRAMs will be built by the Company's licensees and purchased by PC manufacturers in sufficient quantity to become a standard for PC main memory. The Company established a relationship with Intel several years ago, but Intel did not at that time pursue development relating to Rambus technology. There can be no assurance that Intel's current emphasis or priorities will not change in the future, resulting in less attention and fewer resources being devoted to the current Rambus relationship. Although certain aspects of the current relationship between the two companies are contractual in nature, many important aspects depend on the continued cooperation of the two companies. There can be no assurance that Rambus and Intel will be able to work together successfully over an extended period of time. In addition, there can be no assurance that Intel will not develop or adopt competing technologies in the future. See "Business--Target Markets and Applications--PC Main Memory" and "--Rambus Business Model and Strategy."
Revenue Concentration. The Company is subject to revenue concentration risks at both the licensee and the systems company levels. In fiscal 1994, 1995 and 1996 and the first quarter of fiscal 1997, revenues from the Company's top five licensees accounted for approximately 86%, 70%, 65% and 72% of the Company's revenues, respectively. In the first quarter of fiscal 1997, NEC accounted for approximately 33% of revenues and LG Semiconductor accounted for approximately 11% of revenues. Because the revenues derived from various licensees vary from period to period depending on the addition of new contracts, the expiration of deferred revenue schedules under existing contracts and the volumes and prices at which the licensees have recently sold Rambus ICs to systems companies, the particular licensees which account for revenue concentration have varied from period to period. These variations are expected to continue in the foreseeable future although the Company anticipates the revenue will continue to be concentrated in a limited number of licensees.
The royalties received by the Company are a function of the adoption of Rambus technology at the systems company level. Systems companies purchase semiconductors containing Rambus technology from Rambus licensees, and generally do not have a direct contractual relationship with the Company. The Company's licensees generally do not provide detail as to the identity of, or volume of Rambus ICs purchased by, particular systems companies. As a result, the Company faces difficulty in analyzing the extent to which its future revenues will be dependent upon particular systems companies.
The profitability first attained by the Company in the period ended December 31, 1996 was attributable primarily to an increase in royalties from NEC, which the Company believes was largely due to royalties on Rambus technology incorporated into the Nintendo 64 video game system. For reasons described in the foregoing paragraph, the Company cannot precisely quantify this amount, because its licensees generally are not required to identify the particular products that incorporate, or the particular systems companies which purchase, Rambus ICs. The Company anticipates that sales from its licensees to Nintendo will continue to generate a substantial portion of royalties in fiscal 1997. Nintendo faces intense competitive pressure in the video game market, which is characterized by extreme volatility, frequent new product introductions and rapidly shifting consumer preferences, and there can be no assurance as to the unit volumes of Rambus ICs that will be purchased by Nintendo in the future or the level of royalty-bearing revenues that the Company's licensees will receive from Nintendo.
The Company believes its potential to generate royalties in fiscal 1997 is largely dependent on system sales by Nintendo and sales of multimedia controller chips by Cirrus Logic and Chromatic. None of these companies is under any obligation to continue using Rambus technology in its current product or to incorporate Rambus technology into its future products. There can be no assurance that a significant number of other systems companies will adopt the Company's technology or that the Company's dependence upon particular systems companies will decrease in the future. See "--Unpredictable and Fluctuating Operating Results," "--Dependence upon Limited Number of Licensees," "--Dependence upon Systems Companies" and "--No Assurance of Adoption of Rambus Technology as an Industry Standard," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business--Rambus Licensees."
Reliance upon DRAM Market; Declines in DRAM Price and Unit Volume per System. In the fourth quarter of fiscal 1996, a significant percentage of the Company's revenues was in the form of royalties and the Company's business model assumes an increasing percentage of total revenues from royalties. To date, a majority of the Company's royalties has been derived from the sale of logic ICs incorporating RACs. If the Company is successful in its strategy to penetrate the PC main memory market, the Company expects that royalties from the sale of RDRAMs will eventually account for the largest portion of royalties. Royalties on RDRAMs are based on the volumes and prices of RDRAMs manufactured and sold by the Company's licensees. The royalties received by the Company therefore are influenced by many of the risks faced by the DRAM market in general, including constraints on the volumes shipped during periods of shortage and reduced average selling prices. The DRAM market is intensely competitive and generally is characterized by declining average selling prices over the life of a generation of chips. Such price decreases, and the corresponding decreases in per unit royalties received by the Company, can be sudden and dramatic. Compounding the effect of price decreases is the fact that, under certain of the Company's license agreements, royalty rates decrease as a function of time or volume. With the introduction of each new generation of higher density RDRAMs, the Company generally expects higher prices resulting in higher royalties per device, but with correspondingly fewer devices required per system. There can be no assurance that decreases in DRAM prices or in the Company's royalty rates will not have a material adverse effect on the Company's business, results of operations and financial condition. There can be no assurance that the Company will be successful in maintaining or increasing its share of any market. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Rapid Technological Change; Reliance on Fundamental Technology; Importance of Timely New Product Development. The semiconductor industry is characterized by rapid technological change, with new generations of semiconductors being introduced periodically and with ongoing evolutionary improvements. Since beginning operations in 1990, the Company has derived all of its revenue from its interface technology and expects that
this dependence on its fundamental technology will continue for the foreseeable future. Accordingly, broad acceptance of the Company's interface technology is critical to the Company's future success. The introduction or market acceptance of competing technology which renders the Company's interface technology less desirable or obsolete would have a rapid and material adverse effect on the Company's business, results of operations and financial condition. The introduction of new products by the Company, such as the "Direct Rambus" technology which is under development, could cause licensees or systems companies to delay or defer entering into arrangements for the use of the Company's technology, which could have a material adverse effect on the Company's business, results of operations and financial condition.
The Company's operating results will depend to a significant extent on its ability to introduce enhancements and new generations of its interface technology which keep pace with other changes in the semiconductor industry and which achieve rapid market acceptance. The Company must continually devote significant engineering resources to addressing the ever-increasing need for memory bandwidth associated with increases in the speed of microprocessors and other controllers. Technical innovations of the type that will be required for the Company to be successful are inherently complex and require long development cycles, and there can be no assurance that the Company's development efforts will ultimately be successful. In addition, these innovations must be completed before changes in the semiconductor industry have rendered them obsolete, must be available when systems companies require these innovations, and must be sufficiently compelling to cause semiconductor manufacturers to enter into licensing arrangements with Rambus for the new technology. There can be no assurance that Rambus will be able to meet these requirements. Moreover, significant technological innovations generally require a substantial investment before their commercial viability can be determined. There can be no assurance that the Company will have the financial resources necessary to fund future development, that the Company's licensees will continue to share certain research and development costs with the Company as they have in the past, or that revenues from enhancements or new generations of the Company's technology, even if successfully developed, will exceed the costs of development. See "--Competition" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Rambus Business Model and Strategy" and "--Research and Development."
Competition. The semiconductor industry is intensely competitive and has been characterized by price erosion, rapid technological change, short product life cycles, cyclical market patterns and increasing foreign and domestic competition. Most major DRAM manufacturers are developing higher-frequency versions of standard DRAMs such as EDO, SDRAMs and SGRAMs which compete with RDRAMs. These DRAM manufacturers include most Rambus DRAM licensees, as well as other major DRAM manufacturers such as IBM, Texas Instruments Inc. and Micron Technologies, Inc. Most of these companies are much larger and have better access to financial, certain technical and other resources than Rambus. Additional high-speed DRAMs have recently been introduced by other semiconductor companies for specialized applications.
The Company believes that its principal competition may come from its licensees and prospective licensees, many of which are evaluating and developing products based on alternative technologies and are beginning to take a systems approach similar to the Company's in solving the application needs of systems companies. Many DRAM suppliers have indicated that they are developing a new technology called Double Data Rate ("DDR") SDRAMs, aimed at doubling the memory bandwidth from SDRAMs without increasing the clock frequency. In addition, a consortium including both large DRAM manufacturers and systems companies is promoting a specification for an alternative high- speed interface standard called SyncLink. To the extent that these alternative technologies provide comparable system performance at lower cost than RDRAMs, or do not require the payment of comparable royalties, the Company's licensees and prospective licensees may adopt and promote the alternative technologies. There can be no assurance that the Company's future competition will not have a material adverse effect on the Company's business, results of operations and financial condition. In addition, certain semiconductor companies have recently introduced a new kind of IC which combines logic and DRAM on the same chip. Such chips, called "embedded DRAM," eliminate the need for any chip-to- chip interface and are primarily being used for graphics applications. Embedded DRAMs are well suited for applications where
component space saving and power consumption are important, such as in the graphics subsystems of notebook PCs. There can be no assurance that competition from embedded DRAMs will not increase in the future. See "Business--Competition."
Limited Protection of Intellectual Property; Likelihood of Potential Litigation. The Company has an active program to protect its proprietary technology through the filing of patents. At February 28, 1997, the Company held 29 United States patents on various aspects of its technology, with expiration dates ranging from 2010 to 2014. At February 28, 1997, the Company had applications for 32 United States patents pending. The Company's United States patents do not prevent the manufacture or sale of Rambus-based ICs abroad. At February 28, 1997, the Company held six foreign patents and had additional foreign patent applications pending in Taiwan, Korea, Japan and various other jurisdictions. There can be no assurance that the Company's pending United States or foreign patent applications or any future United States or foreign patent applications will be approved, that any issued patents will protect the Company's intellectual property or will not be challenged by third parties, or that the patents of others will not have an adverse effect on the Company's ability to do business. Furthermore, there can be no assurance that others will not independently develop similar or competing technology or design around any patents that may be issued to the Company.
The Company attempts to protect its trade secrets and other proprietary information through agreements with licensees and systems companies, proprietary information agreements with employees and consultants and other security measures. The Company also relies on trademarks and trade secret laws to protect its intellectual property. Despite these efforts, there can be no assurance that others will not gain access to the Company's trade secrets, or that the Company can meaningfully protect its intellectual property. In addition, effective trade secret protection may be unavailable or limited in certain foreign countries. Although the Company intends to protect its rights vigorously, there can be no assurance that such measures will be successful.
Rambus believes that it is important to develop and maintain a uniform RDRAM memory interface standard. The Company's contracts generally prevent a licensee from using licensee-developed patented improvements related to Rambus technology to block other licensees from using the improvements or requiring them to pay additional royalties related to their use of Rambus interface technology. Specifically, the contracts generally require licensees to grant to Rambus a royalty-free cross-license on patented licensee intellectual property related to the implementation of Rambus interface technology, which Rambus sublicenses to other licensees which have entered into similar arrangements. Not all licensees have granted Rambus cross-licenses and there is no assurance that such a blocking arrangement will not occur in the future.
The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. While the Company has not received formal notice of any infringement of the rights of any third party, questions of infringement in the semiconductor field involve highly technical and subjective analyses. Litigation may be necessary in the future to enforce the Company's patents and other intellectual property rights, to protect the Company's trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, and there can be no assurance that the Company would prevail in any future litigation. Any such litigation, whether or not determined in the Company's favor or settled by the Company, would be costly and would divert the efforts and attention of the Company's management and technical personnel from normal business operations, which would have a material adverse effect on the Company's business, financial condition and results of operations. Adverse determinations in litigation could result in the loss of the Company's proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties or prevent the Company from licensing its technology, any of which could have a material adverse effect on the Company's business, financial condition and results of operations.
In any potential dispute involving the Company's patents or other intellectual property, the Company's licensees could also become the target of litigation. While the Company generally does not indemnify its licensees, some of its license agreements require the Company to provide technical support and information to a licensee which is involved in litigation involving use of Rambus technology. The Company is bound to indemnify certain licensees under the terms of certain license agreements, and the Company may agree to indemnify others in the future. The Company's support and indemnification obligations could result in substantial
expenses to the Company. In addition to the time and expense required for the Company to supply such support or indemnification to its licensees, a licensee's development, marketing and sales of Rambus ICs could be severely disrupted or shut down as a result of litigation, which in turn could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Patents and Intellectual Property Protection."
Risks Associated with International Licenses. To date, companies based in Japan and Korea have accounted for the substantial majority of the Company's revenues, and nearly all of its international revenues. In fiscal 1994, 1995 and 1996 and the first quarter of fiscal 1997, international revenues constituted approximately 90%, 90%, 86% and 85% of the Company's net revenues, respectively. The Company expects that revenues derived from international licensees will continue to represent a significant portion of its total revenues in the future. All of the revenues from international licensees have to date been denominated in United States dollars. However, to the extent that such licensees' sales to systems companies are not denominated in United States dollars, any royalties that the Company receives as a result of such sales could be subject to fluctuations in currency exchange rates. In addition, international operations and demand for the products of the Company's licensees are subject to a variety of risks, including tariffs, import restrictions and other trade barriers, changes in regulatory requirements, longer accounts receivable payment cycles, adverse tax consequences, export license requirements, foreign government regulation, political and economic instability and changes in diplomatic and trade relationships. In particular, the laws of certain countries in which the Company currently licenses or may in the future license its technology require significant withholding taxes on payments for intellectual property, which the Company may not be able to offset fully against its United States tax obligations. The Company is subject to the further risk of the tax authorities in those countries recharacterizing certain engineering fees as license fees, which could result in increased tax withholdings and penalties. The Company's licensees are subject to many of the risks described above with respect to systems companies which are located in different countries, particularly video game and PC manufacturers located in Asia and elsewhere. There can be no assurance that one or more of the risks associated with international licenses of the Company's technology will not have a direct or indirect material adverse effect on the Company's business, financial condition and results of operations. Moreover, the laws of certain foreign countries in which the Company's technology is or may in the future be licensed may not protect the Company's intellectual property rights to the same extent as the laws of the United States, thus increasing the possibility of infringement of the Company's intellectual property. See "--Limited Protection of Intellectual Property; Likelihood of Potential Litigation" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Dependence on Key Personnel. The Company's success depends to a significant extent on its ability to identify, attract, motivate and retain qualified technical, sales, marketing, finance and executive personnel. Because the future success of the Company is dependent upon its ability to continue enhancing and introducing new generations of such technology, the Company is particularly dependent upon its ability to identify, attract, motivate and retain qualified engineers with the requisite educational background and industry experience. Approximately three quarters of the Company's personnel have technical degrees, and over half of the Company's personnel have graduate level technical degrees. Competition for qualified engineers, particularly those with significant industry experience, is intense. The Company is also dependent upon its senior management personnel, most of whom have worked together at the Company for several years. The loss of the services of any of the senior management personnel or a significant number of the Company's engineers could be disruptive to the Company's development efforts or business relationships and could have a material adverse effect on the Company's business, financial condition and results of operations. The Company does not have employment contracts with any of its employees. The Company does not plan to maintain key person life insurance in the future. See "Business--Employees" and "Management--Executive Officers, Directors and Key Personnel."
Management of Expanded Operations. The Company is not experienced in managing rapid growth. The Company may not be equipped to successfully manage any future periods of rapid growth or expansion, which could be expected to place a significant strain on the Company's limited managerial, financial, engineering and
other resources. The Company's licensees and systems companies rely heavily on the Company's technological expertise in designing, testing and manufacturing products incorporating the Company's interface technologies. Relationships with new licensees or systems companies generally require significant engineering support. As a result, any increases in adoption of the Company's technology will increase the strain on the Company's resources, particularly the Company's engineers. Any delays or difficulties in the Company's research and development process caused by these factors or others could make it difficult for the Company to develop future generations of its interface technology and to remain competitive. In addition, the rapid rate of hiring new employees could be disruptive and adversely affect the efficiency of the Company's research and development process. The rate of the Company's future expansion, if any, in combination with the complexity of the technology involved in the Company's licensee-based business model, may demand an unusually high level of managerial effectiveness in anticipating, planning, coordinating and meeting the operational needs of the Company as well as the needs of the licensees and systems companies. Additionally, the Company may be required to reorganize its managerial structure in order to more effectively respond to the needs of customers. Given the small pool of potential licensees and target systems companies, the adverse effect on the Company resulting from a lack of effective management in any of these areas will be magnified. Inability to manage the expansion of the Company's business would have a material adverse effect on its business, financial condition and results of operations. See "Management."
No Prior Public Market; Volatility of Stock Price. Prior to this Offering, there has been no public market for the Company's Common Stock, and there can be no assurance that an active public market for the Company's Common Stock will develop or be sustained after the Offering. The initial public offering price will be determined through negotiations between the Company and the Underwriters and may not be indicative of the market price of the Common Stock after the Offering. The trading price of the Company's Common Stock could be subject to wide fluctuations in response to quarterly variations in operating results, announcements of technological innovations or new products by the Company, its licensees or its competitors, developments with respect to patents or proprietary rights, changes in financial estimates by securities analysts and other events or factors. In addition, the equity markets have experienced volatility that has particularly affected the market prices of equity securities of many high technology companies and that often has been unrelated or disproportionate to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of the Company's Common Stock. See "Underwriters."
Concentration of Ownership. The Company's officers, directors and their affiliates will, in the aggregate, beneficially own approximately % of the Company's outstanding shares after the Offering. As a result, these stockholders, if acting together, would be able effectively to control substantially all matters requiring approval by the stockholders of the Company, including the election of directors. This ability may have the effect of delaying or preventing a change in control of the Company, or causing a change in control of the Company which may not be favored by the Company's other stockholders. See "Principal Stockholders."
Certain Anti-Takeover Provisions. Upon completion of this offering, the Company's Board of Directors will have the authority to issue up to 5,000,000 shares of Preferred Stock (less 40,000 shares which have been designated "Series E Preferred Stock" pursuant to the stockholder rights plan recently adopted by the Board of Directors) and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any Preferred Stock that may be issued in the future. The issuance of Preferred Stock, while providing flexibility in connection with possible financings or acquisitions or other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company. The Company has no current plans to issue shares of Preferred Stock. The Company's Bylaws and indemnity agreements provide that the Company will indemnify officers and directors against losses they may incur in legal proceedings resulting from their service to the Company. In addition, the Company recently amended its Certificate of Incorporation to provide for a classified Board of Directors, and eliminate the ability of stockholders to call special meetings of the stockholders, bring certain matters before a meeting of the stockholders without prior notice to the Board, or
amend or repeal certain of the provisions of the Certificate or Bylaws by a vote of less than two thirds of the outstanding stock, and, effective upon the completion of this offering, eliminate the ability of stockholders to take action by written consent. In addition, Section 203 of the Delaware General Corporation Law restricts certain business combinations with any "interested stockholder" as defined by such statute. These provisions and the stockholder rights plan are designed to encourage potential acquirors to negotiate with the Company's Board of Directors and give the Board sufficient opportunity to consider various alternatives to maximize stockholder value. These provisions and the stockholder rights plan are also intended to discourage certain tactics that may be used in proxy fights. However, the stockholder rights plan and each of these provisions of the Company's charter documents could discourage potential acquisition proposals and could delay or prevent a change in control of the Company and, as a consequence, they also may adversely affect the market price of the Company's Common Stock. Such provisions also may have the effect of preventing changes in the management of the Company. See "Description of Capital Stock."
In addition, Intel has a contractual right to make a competitive bid in connection with certain types of potential third-party acquisitions of Rambus. While Rambus is not required to accept any such competing offer, certain penalties would apply upon consummation of a third-party transaction following rejection of a bona fide competing offer from Intel. This arrangement with Intel may significantly discourage future acquisition attempts, even where such acquisitions might be in the best interests of the Rambus stockholders. See "Certain Transactions."
Shares Eligible for Future Sale. Upon completion of this offering (based on shares outstanding at December 31, 1996), the Company will have outstanding an aggregate of shares of Common Stock, assuming no exercise of the Underwriters' over-allotment option and no exercise of outstanding options. Of theses shares, the shares sold in this offering will be freely tradeable without restriction or further registration under the Securities Act, unless such shares are purchased by "affiliates" of the Company as that term is defined in Rule 144 under the Act (the "Affiliates"). The remaining 17,375,480 shares of Common Stock held by existing stockholders are "restricted securities" as that term is defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act. As a result of the contractual restrictions described below and the provisions of Rules 144, 144(k) and 701, the Restricted Shares will be available for sale in the public market as follows: (i) no shares will be eligible for immediate sale on the date of this Prospectus; and (ii) 17,375,480 shares will be eligible for sale upon expiration of the lock-up agreements 180 days after the date of this Prospectus. All officers, directors, stockholders and option holders of the Company have agreed not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly (or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of), any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, for a period of 180 days after the date of this Prospectus, without the prior written consent of Morgan Stanley & Co. Incorporated. The Company intends to file a registration statement on Form S-8 which would allow shares issuable upon exercise of options previously granted to be freely tradeable following release of such lock-up obligations, subject to compliance with Rule 144 in the case of affiliates of the Company. See "Description of Capital Stock--Registration Rights" and "Shares Eligible for Future Sale."
Dilution. Investors participating in the Offering will incur immediate, substantial dilution. To the extent that options or warrants to purchase the Company's Common Stock are exercised, there will be further dilution. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock offered by the Company hereby are estimated to be approximately $ million (approximately $ million if the Underwriters' over-allotment option is exercised in full), at an assumed initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company. The principal purposes of this offering are to obtain additional capital, create a public market for the Company's Common Stock and facilitate future access by the Company to public equity markets. The Company expects to use the net proceeds from this offering for general corporate purposes, including the funding of working capital requirements. A portion of the net proceeds may also be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. There are no present understandings, commitments or agreements with respect to any material acquisition of other businesses, products or technologies. Pending such uses, the Company will invest the net proceeds received by it in this offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common Stock or other securities and does not anticipate paying cash dividends in the foreseeable future.
CAPITALIZATION
The following table sets forth the consolidated capitalization and deferred revenue of the Company (i) as of December 31, 1996, and (ii) as adjusted to reflect the automatic conversion of all outstanding shares of Preferred Stock into Common Stock upon the closing of this offering and the receipt by the Company of the estimated net proceeds from the sale of the shares of Common Stock offered by the Company at an assumed initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company. Since inception, the Company has funded its operations primarily from contract fees and, to a lesser extent, the sale of capital stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources."
DECEMBER 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
Deferred revenue......................................... $ 26,669 $26,669
-------- -------
Total long-term debt(1).................................. $ 1,105 $ 1,105
-------- -------
Stockholders' equity (deficit):
Convertible preferred stock, $.001 par value:
Authorized: 11,336,096 shares;
Issued and outstanding: 11,296,822 shares actual and no
shares as adjusted ................................... 11 --
Common stock, $.001 par value:
Authorized: 22,500,000 shares;
Issued and outstanding: 6,078,658 shares actual and
shares as adjusted(2)............................ 6
Additional paid-in capital............................... 22,744
Accumulated deficit...................................... (34,400)
Cumulative translation adjustment........................ (18)
-------- -------
Total stockholders' equity (deficit) ................ $(11,657) $
-------- -------
Total capitalization................................. $(10,552) $
-------- -------
Total capitalization and deferred revenue............ $ 16,117 $
======== =======
|
DILUTION
The net tangible book value of the Company as of December 31, 1996 was $(11,657,000) or $(0.67) per share of Common Stock. Net tangible book value per share is determined by dividing the tangible book value of the Company (total tangible assets less total liabilities) by the number of outstanding shares of Common Stock at that date (assuming the conversion of all outstanding shares of Preferred Stock into Common Stock). After giving effect to the sale by the Company of the shares of Common Stock offered hereby (at an assumed initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company), the Company's as adjusted net tangible book value at December 31, 1996 would have been $ or $ per share. This represents an immediate increase in net tangible book value to existing stockholders of $ per share and an immediate dilution to new public investors of $ per share. The following table illustrates the per share dilution:
Assumed initial public offering price per share............... $
----
Net tangible book value per share as of December 31, 1996... $(0.67)
Increase in net tangible book value per share attributable
to new investors...........................................
------
As adjusted net tangible book value per share after offering..
----
Dilution per share to new public investors.................... $
====
|
The following table sets forth on an as adjusted basis as of December 31, 1996 the difference between the number of shares of Common Stock purchased from the Company (assuming the conversion of all outstanding shares of Preferred Stock into Common Stock), the total consideration paid and the average price per share paid by the existing stockholders and by the new investors (at an assumed initial public offering price of $ per share and before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company):
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
Existing stockholders.......... 17,375,480 % $22,761,000 % $1.31
New public investors...........
---------- ---- ----------- ----
Total........................ 100% 100%
========== ==== =========== ====
|
The foregoing analysis assumes no exercise of the Underwriters' over- allotment option and no exercise of stock options and a warrant outstanding at December 31, 1996. As of December 31, 1996, there were options outstanding to purchase a total of 3,302,041 shares of Common Stock at a weighted average exercise price of 1.62 per share and 1,000,000 shares of Common Stock issuable upon the exercise of the warrant outstanding as of December 31, 1996 at an exercise price of $10.00 per share. In addition, in February 1997, the Board of Directors adopted the 1997 Stock Plan and the 1997 Employee Stock Purchase Plan, pursuant to which 1,000,000 and 400,000 shares, respectively, were reserved for issuance thereunder. As of December 31, 1996, no options or shares had been issued under any of these plans. Subsequent to December 31, 1996, the Board of Directors granted options under the 1990 Stock Plan to purchase an additional 116,500 shares of Common Stock at weighted average exercise price of $7.73 per share. To the extent that any of these options or the warrant is exercised, there will be further dilution to new public investors. See "Capitalization," "Management--Stock Plans" and Notes 10 and 17 of Notes to Consolidated Financial Statements.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with the Company's consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. The consolidated statement of operations data for the fiscal years ended September 30, 1994, 1995 and 1996 and consolidated balance sheet data as of September 30, 1995 and 1996 are derived from financial statements which have been audited by Coopers & Lybrand L.L.P., independent auditors, included elsewhere in this Prospectus. The consolidated statement of operations data for the years ended September 30, 1992 and 1993 and the consolidated balance sheet data as of September 30, 1992, 1993 and 1994 are derived from financial statements not included in this Prospectus, which have also been audited by Coopers & Lybrand L.L.P. The consolidated statement of operations data for the three months ended December 31, 1995 and 1996 and the consolidated balance sheet data as of December 31, 1996 are derived from the unaudited consolidated financial statements included elsewhere in this Prospectus that have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position and results of operations for such periods. Historical results are not necessarily indicative of the results to be expected in the future and results for interim periods are not necessarily indicative of results for the entire year.
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Contract revenues...... $ 1,916 $ 3,371 $ 5,000 $ 7,364 $11,205 $ 2,510 $4,066
Royalties.............. -- -- -- -- 65 -- 1,425
------- ------- ------- ------- ------- ------- ------
Total revenues......... 1,916 3,371 5,000 7,364 11,270 2,510 5,491
------- ------- ------- ------- ------- ======= ------
Costs and expenses:
Cost of contract
revenues.............. 1,053 1,950 3,844 5,236 4,821 1,115 1,037
Research and
development........... 3,546 4,291 3,067 3,117 5,218 1,142 2,263
Sales and marketing.... 1,250 1,798 2,569 3,376 4,052 955 1,485
General and
administrative........ 1,814 1,294 1,717 1,688 1,747 454 603
------- ------- ------- ------- ------- ------- ------
Total costs and
expenses.............. 7,663 9,333 11,197 13,417 15,838 3,666 5,388
------- ------- ------- ------- ------- ------- ------
Operating income
(loss)................. (5,747) (5,962) (6,197) (6,053) (4,568) (1,156) 103
Other income (expense).. 115 (123) (81) 322 439 112 45
------- ------- ------- ------- ------- ------- ------
Income (loss) before
income taxes........... (5,632) (6,085) (6,278) (5,731) (4,129) (1,044) 148
Provision for income
taxes.................. 962 251 351 1,289 286 82 56
------- ------- ------- ------- ------- ------- ------
Net income (loss)....... $(6,594) $(6,336) $(6,629) $(7,020) $(4,415) $(1,126) $ 92
======= ======= ======= ======= ======= ======= ======
Pro forma net income
(loss) per share(1).... $ (0.25) $ 0.01
======= ======
Pro forma shares used in
per share
calculations(1)........ 17,432 20,018
======= ======
|
SEPTEMBER 30,
---------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996
------- ------- -------- -------- -------- ------------
(IN THOUSANDS) (UNAUDITED)
CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and marketable
securities............. $ 1,866 $ 2,459 $ 5,046 $ 14,150 $ 8,554 $ 10,928
Total assets............ 5,300 7,807 8,395 18,307 12,868 18,703
Total debt(2)........... 1,055 1,698 1,655 1,616 1,297 1,932
Stockholders' deficit... (7,061) (8,351) (10,006) (7,936) (12,144) (11,657)
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future actual results to differ materially from the Company's recent results or those projected in the forward-looking statements include, but are not limited to, those discussed in "Risk Factors" and below. The Company assumes no obligation to update the forward-looking statements or such factors.
OVERVIEW
Since its founding in March 1990, Rambus has been engaged in the development of high-speed chip-to-chip interface technology which can be used to enhance the performance and cost-effectiveness of consumer electronics, computer systems and other electronic systems. The Company neither manufactures nor sells semiconductors incorporating the Company's technology. Rather, the Company licenses its technology on a nonexclusive and worldwide basis to semiconductor companies which manufacture and sell RDRAMs and logic ICs containing RACs to systems companies which have adopted Rambus technology. Systems companies are not required to obtain a Rambus license to incorporate Rambus ICs into their products. See "Business."
REVENUES
The Company's revenues consist of contract fees and royalties. Contract fees are comprised of license fees, engineering service fees and nonrefundable, prepaid royalties, and have represented substantially all of the Company's revenues to date. The Company's contracts generally require a licensee to pay a contract fee to Rambus typically ranging from a few hundred thousand dollars for a narrow license covering a single logic product to millions of dollars for a license with broad coverage of Rambus technology. Part of these fees may be due upon the achievement of certain milestones, such as provision of certain deliverables by Rambus or production of chips by the licensee. All contract fees are nonrefundable. See "Business--Rambus Licensees" and "-- Rambus Business Model and Strategy."
In a few cases, the Company has received nonrefundable, prepaid royalties which offset the earliest royalty payments otherwise due from the licensee. As of December 31, 1996, $2.7 million of such nonrefundable, prepaid royalties had offset initial royalties, and the Company had a balance of $4.1 million remaining to be offset against future royalties.
Royalties, which are generally a percentage of the revenues received by a licensee on its sales of Rambus ICs, are normally payable by the licensee on sales occurring during the life of the Rambus patents being licensed. For a typical application of Rambus technology, the Company receives royalties from the sale of both RDRAMs and logic ICs containing RACs. Royalty rates range up to approximately 2.5% for RDRAMs and 5% for logic ICs, and in some cases may decline based on the passage of time or on the total volume of Rambus ICs shipped by a licensee. The exact rate and structure of a royalty arrangement with a particular licensee depend on a number of factors, including the amount of the contract fee paid by the licensee and the marketing and engineering commitment made by the licensee.
Substantially all of the license fees, engineering service fees and nonrefundable, prepaid royalties are bundled together as contract fees because the Company generally does not provide or price these components separately. The contracts also include rights to upgrades and enhancements. Accordingly, Rambus recognizes contract revenues ratably over the period during which post- contract customer support is expected to be provided. The excess of contract fees received over contract revenue recognized is shown on the Company's balance sheet
as "deferred revenue." As of December 31, 1996, the Company's deferred revenue was $26.7 million, substantially all of which is scheduled to be recognized in varying amounts over the next five years.
Rambus recognizes royalties from a licensee in the quarter in which it receives the report detailing shipments of Rambus ICs by such licensee in the prior quarter. The first sale of Rambus ICs by a licensee occurred during the fourth quarter of fiscal 1994. However, due to a combination of the one- quarter reporting delay and nonrefundable, prepaid royalty offsets, the first royalties were not reported by the Company until the third quarter of fiscal 1996. Although royalties have represented a small portion of the Company's revenues to date, the Company believes that royalties will become an increasing portion of revenues in the future. See Note 2 of Notes to Consolidated Financial Statements.
In the past, certain components of the Company's revenues have fluctuated and have been difficult to predict. The Company expects that this will continue to be the case in the future. Although the schedule for recognizing deferred revenue under existing contracts is known, it is difficult for the Company to predict the timing and amount of deferred revenue streams associated with new contracts, if any, because the Company's contracts typically involve long business development cycles and negotiated financial terms. The Company's contract revenues may be subject to sudden increases or decreases upon the addition of a new contract or the expiration of the deferred revenue schedule under an existing contract. Because these events may involve substantial amounts and do not occur with any regularity, any such increase or decrease generally is not indicative of future period-to-period increases or decreases. The Company believes that its continued success will be substantially dependent upon royalties increasing at a rate which more than offsets decreases in the recognition of deferred revenue under existing contracts as their recognition periods expire, as well as the Company's ability to add new licensees and to license new generations of its technology to its existing licensees. Nonrefundable, prepaid royalties, which are bundled into contract fees, are recognized ratably over the period during which post- contract customer support is expected to be provided, and are not related to the actual rate at which Rambus ICs are shipped by the licensee. Accordingly, the amount of nonrefundable, prepaid royalties recognized in a period is not necessarily representative of the rate at which the prepaid royalties are being offset. In addition, the Company may experience sudden and significant fluctuations in royalties to the extent that one or more systems companies switches its source of Rambus ICs for a particular application to a licensee with a different nonrefundable, prepaid royalty balance or different royalty rate than the original source. See "Risk Factors--Unpredictable and Fluctuating Operating Results."
To date, a majority of the Company's royalties has been derived from the sale of logic ICs incorporating RACs. If the Company is successful in its strategy to penetrate the PC main memory market segment, the Company expects that royalties from the sale of RDRAMs will eventually account for the largest portion of royalties. See "Risk Factors--Future Dependence upon PC Main Memory Market Segment and Intel" and "--Reliance upon DRAM Market; Declines in DRAM Price and Unit Volume per System."
As of February 28, 1997, the Company had 19 licensees. Because all of the Company's revenues are derived from its relatively small number of licensees, the Company's revenues tend to be highly concentrated. In fiscal 1994, 1995 and 1996 and the first quarter of fiscal 1997, revenues from the top five licensees accounted for approximately 86%, 70%, 65% and 72% of the Company's revenues, respectively. In the first quarter of fiscal 1997, NEC accounted for approximately 33% of revenues and LG Semicon accounted for approximately 11% of revenues. The Company expects that it will continue to experience significant revenue concentration for the foreseeable future. However, the particular licensees which account for revenue concentration may vary from period to period depending on the addition of new contracts, the expiration of deferred revenue schedules under existing contracts, and the volumes and prices at which the licensees sell Rambus ICs to systems companies in any given period. See "Risk Factors--Revenue Concentration" and Note 3 of Notes to Consolidated Financial Statements.
The royalties received by the Company are also a function of the adoption of Rambus technology by systems companies and the acceptance of the systems companies' products by end users. The Company generally does not have a direct contractual relationship with systems companies, and the royalty reports submitted by the
Company's licensees generally do not disclose the identity of, or unit volume of Rambus ICs purchased by, particular systems companies. As a result, it is difficult for the Company to predict the extent to which its future revenues will be dependent upon particular systems companies. See "Risk Factors-- Dependence upon Systems Companies."
To date, companies based in Japan and Korea have accounted for the substantial majority of the Company's revenues, and nearly all of its international revenues. In fiscal 1994, 1995 and 1996 and the first quarter of fiscal 1997, international revenues comprised approximately 90%, 90%, 86% and 85% of the Company's net revenues, respectively. The Company expects that revenues derived from international licensees will continue to represent a significant portion of its total revenues in the future. All of the revenues from international licensees to date have been denominated in United States dollars. See "Risk Factors--Risks Associated with International Licenses" and Note 14 of Notes to Consolidated Financial Statements.
EXPENSES
Since the Company's inception in March 1990, its engineering costs (which consist of cost of contract revenues and research and development expenses) and sales and marketing expenses have continually increased as the Company has added personnel and ramped up its activities in these areas. Engineering costs and sales and marketing expenses generally have decreased as a percentage of revenues throughout this period due to the relatively rapid revenue base expansion which the Company experienced as it began entering into license agreements. The Company intends to continue making significant expenditures associated with engineering and sales and marketing, and expects that these costs and expenses will continue to be a significant percentage of revenues in future periods. Whether such expenses increase or decrease as a percentage of revenues will be substantially dependent upon the rate at which the Company's revenues change. See Note 2 of Notes to Consolidated Financial Statements.
Engineering costs are allocated between cost of contract revenues and research and development expenses. Cost of contract revenues is determined based on the portion of engineering costs which have been incurred during the period for the adaptation of Rambus interface technology for specific licensee processes. The balance of engineering costs, incurred for general development of Rambus technology, is charged to research and development. In a given period, the allocation of engineering costs between these two components is a function of the timing of development and implementation cycles. As a generation of technology matures from the development stage through implementation, the majority of engineering costs shifts from research and development expenses to cost of contract revenues. Engineering costs are recognized as incurred and do not correspond to the recognition of revenues under the related contracts. See "Business--Technology and Products" and "Research and Development."
Sales and marketing expenses include salaries, travel expenses and costs associated with trade shows, advertising and other marketing efforts. Costs of technical support for systems companies, including applications engineering, are also expensed to sales and marketing. Consistent with the Company's business model, sales and marketing activities are focused on developing relationships with potential licensees and on participating with existing licensees in marketing, sales and technical efforts directed to systems companies. In many cases, Rambus must dedicate substantial resources to market to and support systems companies. Due to the long business development cycles faced by the Company, as well as the fact that the Company does not have a commission compensation structure, sales and marketing expenses in a given period generally are unrelated to the level of revenues in that period or in recent or near-term future periods. See "Business--Rambus Business Model and Strategy" and "Sales and Marketing."
TAXES
The Company has incurred cumulative net operating losses for federal tax purposes of approximately $8.9 million through September 30, 1996. Net operating losses for state tax purposes were approximately $3.5 million
through September 30, 1996. The Company also has foreign tax credit carryforwards of approximately $2.4 million, and research and development credit carryforwards of $867,000 through September 30, 1996.
The Company reports certain items of income and expense for financial statement purposes in different years than they are reported in the tax return. Specifically, the Company reports contract fees and royalties when received for tax purposes, as required by tax law. For financial reporting purposes, the Company records revenues from contract fees over the period post-contract support is expected to be provided. Accordingly, the Company's net operating loss for tax purposes is less than the cumulative operating deficit recorded for financial statement purposes. See Notes 2 and 12 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of total revenues represented by certain items reflected in the Company's consolidated statements of operations:
THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------- ---------------
1994 1995 1996 1995 1996
--------- -------- -------- ------ ------
Revenues:
Contract revenues........ 100.0% 100.0% 99.4% 100.0% 74.0%
Royalties................ -- -- 0.6 -- 26.0
--------- -------- -------- ------ ------
Total revenues......... 100.0% 100.0% 100.0% 100.0% 100.0%
========= ======== ======== ====== ======
Costs and Expenses:
Cost of contract
revenues................ 76.9 71.1 42.8 44.4 18.9
Research and
development............. 61.3 42.3 46.3 45.5 41.2
Sales and marketing...... 51.4 45.8 36.0 38.0 27.0
General and
administrative.......... 34.3 22.9 15.5 18.1 11.0
--------- -------- -------- ------ ------
Total costs and
expenses.............. 223.9 182.2 140.5 146.1 98.1
--------- -------- -------- ------ ------
Operating income (loss).... (123.9) (82.2) (40.5) (46.1) 1.9
Other income (expense)..... (1.6) 4.4 3.9 4.5 0.8
--------- -------- -------- ------ ------
Income (loss) before income
taxes..................... (125.6) (77.8) (36.6) (41.6) 2.7
Provision for income
taxes..................... 7.0 17.5 2.5 3.3 1.0
--------- -------- -------- ------ ------
Net income (loss).......... (132.6)% (95.3)% (39.2)% (44.9)% 1.7%
========= ======== ======== ====== ======
|
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996
Revenues. Revenues were $2.5 million and $5.5 million in the first quarter of fiscal 1996 and fiscal 1997, respectively. Contract revenues increased 62.0%, from $2.5 million in the first quarter of fiscal 1996 to $4.1 million in the first quarter of fiscal 1997. This increase was a result of the Company's entering into contracts with new licensees and additional contracts with current licensees for new developments, especially for an extension of the Company's technology to provide a higher bandwidth interface for future PC main memory applications.
The Company recorded its first significant royalties in the first quarter of fiscal 1997, consisting primarily of royalties from NEC, which the Company believes were largely based on sales of Rambus ICs for use in the Nintendo 64 home video game system. The Company anticipates that its potential to generate royalties in the remainder of fiscal 1997 is largely dependent on system sales by Nintendo and, to a lesser extent, sales by Cirrus Logic and Chromatic. Nintendo faces intense competitive pressure in the home video game market, which is characterized by extreme volatility, frequent new product introductions and rapidly shifting consumer preferences, and there can be no assurance as to the unit volumes of Rambus ICs that will be purchased by
Nintendo in the future or the level of royalty-bearing revenues that the Company's licensees will receive from Nintendo. None of the systems companies currently incorporating Rambus interface technology into their products is contractually obligated to continue using Rambus ICs. See "Risk Factors-- Dependence upon Systems Companies," "--Revenue Concentration," "Business-- Rambus Licensees" and "--Rambus Business Model and Strategy."
Engineering Costs. Engineering costs, consisting of cost of contract revenues and research and development expenses, were $2.3 million and $3.3 million, which represented 89.9% and 60.1% of revenues, in the first quarter of fiscal 1996 and fiscal 1997, respectively. The increase in engineering costs was due primarily to an increase in engineering personnel, and the decrease as a percentage of revenues was primarily the result of the Company's growth in revenues.
Cost of Contract Revenues. Cost of contract revenues was $1.1 million and $1.0 million, which represented 44.4% and 18.9% of revenues, in the first quarter of fiscal 1996 and fiscal 1997, respectively. Cost of contract revenues decreased 7.0% in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 due to several of the Company's licensees reaching the production phase during the latter part of fiscal 1996, thus reducing the implementation, customization, support and enhancement services required of the Company. The decrease in cost of contract revenues as a percentage of revenues from the first quarter of fiscal 1996 to the first quarter of fiscal 1997 was primarily the result of the Company's growth in revenues. The Company believes that the level of cost of contract revenues will continue to fluctuate in the future, both in absolute dollars and as a percentage of revenues, as new generations of Rambus ICs go through the normal development and implementation phases.
Research and Development. Research and development expenses were $1.1 million and $2.3 million, which represented 45.5% and 41.2% of revenues, in the first quarter of fiscal 1996 and fiscal 1997, respectively. Research and development expenses increased 98.2% in the first quarter of fiscal 1997 compared to the same period in fiscal 1996 due to development efforts related to a new generation of 64 Mbit RDRAMs and associated RACs, including an extension of the Company's technology to provide a higher bandwidth interface for future PC main memory applications. The higher costs were primarily due to increased engineering personnel. The Company expects research and development expenses to increase over time as it enhances and improves its technology and applies it to new generations of ICs.
Sales and Marketing. Sales and marketing expenses were $1.0 million and $1.5 million, which represented 38.0% and 27.0% of revenues, in the first quarter of fiscal 1996 and fiscal 1997, respectively. Sales and marketing expenses increased 55.5% in the first quarter of fiscal 1997 compared to the same period in fiscal 1996 due to a buildup of the marketing and sales teams in both the U.S. and Japan as well as increased costs associated with applications engineering and other technical support for systems companies, trade shows, advertising and other marketing efforts. The decrease in sales and marketing expenses as a percentage of revenues reflects the increased revenue base. The Company expects sales and marketing expenses to increase in the future as the Company puts additional effort into marketing its technology and assisting systems companies to adapt this technology to new generations of products.
General and Administrative. General and administrative expenses were $454,000 and $603,000, which represented 18.1% and 11.0% of revenues, in the first quarter of fiscal 1996 and fiscal 1997, respectively. General and administrative expenses increased 32.8% in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 as the Company added headcount to support an increasing number of employees and licensees. As a percentage of revenues, general and administrative expenses decreased, reflecting the increased revenue base. The Company anticipates incurring additional general and administrative expenses in the future as required to support an increasing number of employees and licensees and as a result of becoming a public company.
Other Income (Expense). Net other income consists primarily of interest income from the Company's short-term cash investments, offset by interest expense on leases and other equipment financing. Net other income was $112,000 and $45,000, which represented 4.5% and 0.8% of revenues, in the first quarter of fiscal
1996 and fiscal 1997, respectively. Net other income decreased 59.8% in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 due to lower interest income on a lower average cash investment balance in the fiscal 1997 period. The Company expects net other income to increase in the future due to additional interest income on higher cash balances.
Provision for Income Taxes. The Company recorded a provision for income taxes of $56,000 in the first quarter of fiscal 1997, a decrease of 31.7% from the $82,000 recorded in the first quarter of fiscal 1996. The difference is due to a reduction in foreign withholding taxes on license revenue, offset by an increase in estimated provision for federal and state taxes. See Notes 2 and 12 of Notes to Consolidated Financial Statements.
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
Revenues. Revenues were $5.0 million, $7.4 million and $11.3 million in fiscal 1994, 1995 and 1996, respectively. In both fiscal 1994 and fiscal 1995, the Company had no royalties, and the 47.3% increase in fiscal 1995 compared to fiscal 1994 was due to a combination of new license contracts and a full year of revenues from contracts booked during fiscal 1994. While the Company received its first royalties in fiscal 1996, most of the 53.0% increase in revenues compared to fiscal 1995 was again due to a combination of new contracts and a full year of revenues from contracts booked during fiscal 1995.
Engineering Costs. Engineering costs, consisting of cost of contract revenues and research and development expenses, were $6.9 million, $8.4 million and $10.0 million, which represented 138.2%, 113.4% and 89.1% of revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in engineering costs was due primarily to an increase in engineering personnel, and the decrease as a percentage of revenues was primarily the result of the Company's growth in revenues.
Cost of Contract Revenues. Cost of contract revenues was $3.8 million, $5.2 million and $4.8 million, which represented 76.9%, 71.1% and 42.8% of revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in absolute dollars from fiscal 1994 to fiscal 1995 was due to headcount increases and costs associated with implementation, customization, customer support and enhancements for a growing base of technology licensees. During fiscal 1994 and fiscal 1995, most of these licensees were in the pre- production phase of developing 16 Mbit and 18 Mbit Rambus RDRAMs and associated RACs, and therefore the related costs of Company implementation and support were high. Cost of contract revenues decreased 7.9% in fiscal 1996 compared to fiscal 1995 due to several of the Company's licensees reaching the production phase during fiscal 1996, thus reducing the implementation, customization, support and enhancement services required of the Company. The decrease in cost of contract revenues as a percentage of revenues from fiscal 1994 to fiscal 1996 was primarily the result of the Company's growth in revenues.
Research and Development. Research and development expenses were $3.1 million, $3.1 million and $5.2 million, which represented 61.3%, 42.3% and 46.3% of revenues, in fiscal 1994, fiscal 1995 and fiscal 1996, respectively. Research and development expenses remained relatively flat between fiscal 1994 and fiscal 1995 due to the requirement for the Company's engineering department to focus on licensee-specific implementations of 16 Mbit and 18 Mbit Rambus RDRAMs and associated RACs, which is charged to cost of contract revenues. Research and development expenses increased 67.4% in fiscal 1996 compared to fiscal 1995 due to development efforts associated with a new generation of 64 Mbit RDRAMs and associated RACs. The higher costs were primarily due to increased headcount.
Sales and Marketing. Sales and marketing expenses were $2.6 million, $3.4 million and $4.1 million, which represented 51.4%, 45.8% and 36.0% of revenues, in fiscal 1994, 1995 and 1996, respectively. This increase in absolute dollars reflected the building of the sales and marketing teams in both the U.S. and Japan, development of an applications engineering group to help systems companies adapt Rambus technology to their needs, costs associated with trade shows and other marketing efforts. The decrease in sales and marketing expenses as a percentage of revenues reflected the increased revenue base.
General and Administrative. General and administrative expenses remained flat at $1.7 million, which represented 34.3%, 22.9% and 15.5% of revenues, in fiscal 1994, 1995 and 1996, respectively. In absolute dollars, these expenses remained relatively constant as the Company was able to increase its revenues without significantly increasing its infrastructure. As a percentage of revenues, general and administrative expenses decreased, reflecting the increased revenue base.
Other Income (Expense). Net other income (expense) was $(81,000), $322,000 and $439,000, which represented (1.6)%, 4.4% and 3.9% of revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in absolute dollars was due to interest on higher average cash investment balances, offset by interest associated with leased equipment.
Provision for Income Taxes. The Company reported a tax net operating loss of approximately $3.6 million for fiscal 1994. For fiscal 1995, the Company reported taxable income of approximately $2.1 million, attributable to contract fees and royalties received during that year. While net operating loss carryovers were available to offset this income, alternative minimum tax of approximately $40,000 for federal purposes and approximately $14,000 for state purposes was incurred. The Company had a tax net operating loss of approximately $4.9 million in the year ended September 30, 1996.
For fiscal 1994, 1995 and 1996, the Company paid foreign withholding taxes of approximately $350,000, $1.2 million and $270,000, respectively, on income from contract fees and royalties. These taxes may potentially be claimed as foreign-tax credits for U.S. federal tax purposes, provided the Company incurs future U.S. tax liability, and are subject to foreign tax credit limitations and a five year carryover restriction imposed by U.S. tax law. See Notes 2 and 12 of Notes to Consolidated Financial Statements.
QUARTERLY RESULTS OF OPERATIONS
The following tables present certain unaudited quarterly consolidated statements of operations data, both in absolute dollars and as a percentage of revenues, for the five quarters ended December 31, 1996. In the opinion of management, this information has been presented on the same basis as the audited consolidated financial statements appearing elsewhere in this Prospectus, and all necessary adjustments have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements of the Company. Results of operations for any quarter are not necessarily indicative of the results to be expected for the entire fiscal year or for any future period.
QUARTER ENDED
----------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1995 1996 1996 1996 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Contract revenues...... $ 2,510 $ 2,562 $ 2,833 $ 3,299 $4,066
Royalties.............. -- -- 1 64 1,425
------- ------- ------- ------- ------
Total revenues....... 2,510 2,562 2,834 3,363 5,491
------- ------- ------- ------- ------
Costs and Expenses:
Cost of contract
revenues.............. 1,115 1,186 1,275 1,245 1,037
Research and
development........... 1,142 1,271 1,235 1,569 2,263
Sales and marketing.... 955 826 1,100 1,171 1,485
General and
administrative........ 454 379 397 518 603
------- ------- ------- ------- ------
Total costs and
expenses............ 3,666 3,662 4,007 4,503 5,388
------- ------- ------- ------- ------
Operating income (loss).. (1,156) (1,100) (1,173) (1,140) 103
Other income (expense)... 112 92 85 151 45
------- ------- ------- ------- ------
Income (loss) before
income taxes............ (1,044) (1,008) (1,088) (989) 148
Provision for income
taxes................... 82 101 -- 103 56
------- ------- ------- ------- ------
Net income (loss)........ $(1,126) $(1,109) $(1,088) $(1,092) $ 92
------- ------- ------- ------- ------
Pro forma net income
(loss) per share........ $ (0.07) $ (0.06) $ (0.06) $ (0.06) $ .01
======= ======= ======= ======= ======
Pro forma shares used in
per share calculation... 17,342 17,442 17,457 17,489 20,018
======= ======= ======= ======= ======
AS A PERCENTAGE OF REVENUES
----------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1995 1996 1996 1996 1996
-------- -------- -------- -------- --------
Revenues:
Contract revenues...... 100.0% 100.0% 100.0% 98.1% 74.0%
Royalties.............. -- -- -- 1.9 26.0
------- ------- ------- ------- ------
Total revenues....... 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= ======
Costs and Expenses:
Cost of contract
revenues.............. 44.4 46.3 45.0 37.0 18.9
Research and
development........... 45.5 49.6 43.6 46.7 41.2
Sales and marketing.... 38.0 32.2 38.8 34.8 27.0
General and
administrative........ 18.1 14.8 14.0 15.4 11.0
------- ------- ------- ------- ------
Total costs and
expenses............ 146.1 142.9 141.4 133.9 98.1
------- ------- ------- ------- ------
Operating income (loss).. (46.1) (42.9) (41.4) (33.9) 1.9
Other income (expense)... 4.5 3.6 3.0 4.5 0.8
------- ------- ------- ------- ------
Income (loss) before
income taxes............ (41.6) (39.3) (38.4) (29.4) 2.7
Provision for income
taxes................... 3.3 3.9 -- 3.1 1.0
------- ------- ------- ------- ------
Net income (loss)........ (44.9)% (43.3)% (38.4)% (32.5)% 1.7%
======= ======= ======= ======= ======
|
The Company's contract revenues have increased in each of the last five quarters due to the addition of both new licensees and new engineering implementations for existing licensees. While quarterly revenues from existing licenses is predictable over the contracts' respective lives, total contract revenues will decline in the future if the Company does not continue to obtain new licensees or if it is unsuccessful in securing new engineering implementation work from existing licensees.
Royalties became significant only in the first quarter of fiscal 1997 and are the primary reason the Company became profitable in that quarter. During that quarter, the Company received royalty reports from the three licensees which had shipped Rambus-based products during the prior quarter. Of these, one licensee's royalties were completely offset against nonrefundable, prepaid royalties and another, NEC, accounted for substantially all of the royalties for the quarter. While licensee reports generally do not break down sales of license-bearing products by customer, the Company believes that a large percentage of the royalties from NEC for the first quarter of fiscal 1997 were due to sales of Rambus ICs to Nintendo for incorporation in the Nintendo 64 home video game system. With such a concentration of royalties based on one system, it is likely that royalties will vary greatly in subsequent quarters. The Company does not expect an increase in the number of licensees providing royalty reports during the second quarter of fiscal 1997 with respect to shipments made during the first quarter of fiscal 1997. If royalties were to decline, the Company would likely again become unprofitable.
Costs and expenses have generally increased in each of the five quarters ended December 31, 1996. Cost of contract revenues has remained relatively flat during this period, reflecting both the relative independence of this cost element from revenue changes and the relatively flat requirement for engineering implementation, customization, customer support and enhancements over this period. On the other hand, research and development expenses have generally increased over this period due principally to personnel additions associated with application of the Company's technology to a new generation of 64 Mbit RDRAMs and associated RACs, including an extension of the Company's technology to provide a higher bandwidth interface for future PC main memory applications. Sales and marketing expenses also increased throughout this period due to a buildup of the marketing and sales teams, as well as increased costs associated with applications engineering and other technical support for systems companies, trade shows, advertising and other marketing efforts. General and administrative expenses increased during the last three quarters as the Company added headcount to support an increasing number of employees and licensees. The Company believes that engineering costs, sales and marketing expenses and general and administrative expenses all will increase in future quarters.
The Company has granted to Intel Corporation a warrant for the purchase of 1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The warrant will become exercisable only upon the achievement of certain milestones, which will result in a charge to the statement of operations at the time achievement of the milestones becomes probable for the excess of the then fair value of the warrant over the exercise price.
The Company's business is subject to a variety of additional risks that could materially adversely affect quarterly and annual operating results, including market acceptance of the Company's technology; systems companies' acceptance of Rambus ICs produced by the Company's licensees; market acceptance of the products of systems companies which have adopted the Company's technology; the loss of any strategic relationships with systems companies or licensees; announcements or introductions of new technologies or products by the Company or the Company's competitors; delays or problems in the introduction or performance of enhancements or future generations of the Company's technology; fluctuations in the market price and demand for DRAMs and logic ICs into which the Company's technology has been incorporated; competitive pressures resulting in lower contract revenues or royalty rates; changes in the Company's and system companies' development schedules and levels of expenditure on research and development; personnel changes, particularly those involving engineering and technical personnel; costs associated with protecting the Company's intellectual property; changes in Company strategies; foreign exchange rate fluctuations or other changes in the international business climate; and general economic trends and other factors.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has funded its operations primarily from approximately $52.8 million in contract payments (net of foreign withholding taxes) received through December 31, 1996, and to a lesser extent, the sale of approximately $21.4 million of convertible preferred stock and preferred stock purchase rights. At December 31, 1996, the Company had cash and cash equivalents and marketable securities of $10.9 million. As of December 31, 1996, the Company had an accumulated deficit of $34.4 million and negative working capital of $2.2 million, including a short-term component of deferred revenue of $14.3 million. Deferred revenue represents the excess of cash received from licensees over revenue recognized on license contracts, and the short-term component represents the amount of this deferred revenue to be recognized over the next twelve months. Without the deferred revenue, working capital would have been a positive $12.1 million.
The Company's operating activities used net cash of $1.8 million in fiscal 1994, provided net cash of $1.3 million in fiscal 1995, used net cash of $3.5 million in fiscal 1996 and provided net cash of $1.9 million in the first quarter of fiscal 1997. Cash used by operations in fiscal 1994 was due to the net loss, adjusted for non-cash items, offset by a decrease in accounts receivable and other assets and an increase in deferred revenue. Cash generated by operations in fiscal 1995 was primarily the result of an increase in deferred revenue offset by the net loss, adjusted for non-cash item and an increase in accounts receivable. Cash used by operations in fiscal 1996 was due to the net loss, adjusted for non-cash items, and an increase in deferred revenue offset by a decrease in accounts receivable. Cash generated by operations in the first quarter of fiscal 1997 was primarily the result of an increase in deferred revenue offset by a decrease in accounts receivable.
Net cash used in investing activities was $3.6 million, $10.4 million and $1.5 million in fiscal 1994, fiscal 1995 and the first quarter of fiscal 1997, respectively; net cash provided by investing activities was $3.9 million in fiscal 1996. Investing activities have consisted primarily of net purchases of marketable securities and purchases of property and equipment. See Notes 2, 5, 8, 9 and 15 of Notes to Consolidated Financial Statements.
Net cash provided by financing activities were $4.5 million, $8.5 million and $1.1 million in fiscal 1994, fiscal 1995 and the first quarter of fiscal 1997, respectively; net cash used in financing activities was $546,000 in fiscal 1996. Financing activities have consisted primarily of sales of convertible preferred stock and preferred stock purchase rights offset by principal payments on capital leases. See Notes 2, 4 and 15 of Notes to Consolidated Financial Statements.
The Company has incurred substantial expenditures related to the development and marketing of its technology. Future development and marketing of extensions of the Company's technology and further enhancements to the Company's original technology will require substantial additional funds. While the first quarter of fiscal 1997 was the Company's first profitable quarter, there can be no assurance that the Company will remain profitable in the future.
The Company has a $1 million line of credit with Silicon Valley Bank. Under the terms of the line of credit, borrowings bear interest at a rate of prime plus 1% per annum, and the Company must comply with certain financial covenants. At December 31, 1996, approximately $794,000 was outstanding under the line of credit, and the Company was in compliance with all material covenants. This line of credit expires in October 2000.
The Company presently anticipates that the net proceeds from this offering, together with existing sources of liquidity and cash anticipated to be provided by operations, will be adequate to meet its cash needs for at least the next twelve months.
BUSINESS
The key elements of the Rambus interface are RDRAMs, RACs and the interconnecting circuitry known as the "Rambus Channel." The high-speed interface technology Rambus has developed is applicable to data transfer between most semiconductor chips. The Company has initially chosen to concentrate the application of its technology on the interface between logic ICs and memory devices because of the acute performance needs and the relevant market sizes. The Company believes that the systems which will best utilize the high bandwidth provided by current Rambus technology are the relatively high-volume, low-cost systems in which the cost of the memory subsystems represents a significant portion of the selling price. To date, the principal applications for the Company's technology have been in the consumer multimedia, PC multimedia and workstation multimedia markets. These areas accounted for the sale of approximately $13,000, $11 million, and $444 million of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996, respectively. Other applications currently being developed include multifunction peripheral controllers for combination fax/copier/scanner/laser printer devices, and networking equipment such as high-speed ethernet switches. In addition, the Company and Intel Corporation have entered into a development and license agreement and are working together to develop an extension of the Rambus interface technology optimized for the PC main memory market segment.
INDUSTRY BACKGROUND
Worldwide demand for semiconductor devices has increased significantly in recent years due to growth in the demand for electronic systems which use semiconductors, as well as an increase in the semiconductor content of these systems. According to Dataquest, Inc., an independent research organization, the worldwide market for semiconductors was $137 billion in 1996, and is estimated to reach $290 billion by the year 2000.
Among the factors that contribute to this growth are the reduced costs and increasing performance of home video games, PCs, workstations, servers and networking equipment, as well as the improving price/performance ratio of semiconductors themselves. For example, home video game consumers are requiring increasingly sophisticated color and 3D capabilities to match those available in large arcade machines. PC purchasers are increasingly demanding multimedia-equipped systems which support features such as full motion video, sophisticated 3D graphics, high-quality audio and images with greater color depth and higher resolution. The increased performance of PCs and the availability of sophisticated PC engineering and multimedia authoring applications are, in turn, driving manufacturers of workstations to develop even more sophisticated 3D graphics and other multimedia capabilities. Similarly, evolving network technology and infrastructure are driving the demand for performance improvements in servers and networking equipment. Systems manufacturers are under constant pressure to introduce enhanced capabilities and higher performance while keeping prices within reach of their target markets.
The performance of a computer or other electronic system is typically constrained by the speed of its slowest element. In the past, that element was the logic IC that controlled the system's specific functions and performed calculations--the microprocessor. In recent years, however, new generations of microprocessors have become substantially faster and more powerful, and increasingly the bottleneck in system performance is becoming the component that stores the instructions and data needed by the microprocessor--the DRAM.
Since 1980, the typical operating frequency of Intel and other mainstream microprocessors has increased approximately 40 times from 5 MHz (million cycles per second) to 200 MHz. During this same period, the typical operating frequency of a standard DRAM (known as a "page mode" DRAM) has increased by approximately five times. Even the evolutionary improvements to DRAM technology, including the FPM (fast-page mode) DRAM, the EDO (extended-data- out) DRAM, the SDRAM (synchronous DRAM) and the SGRAM ( a version of the SDRAM for graphics applications), have only been able to provide an improvement of up to approximately ten times. This growing disparity between the frequency of microprocessors and DRAMs is termed the "Performance Gap."
[LOGO CHART OF X86 MPV]
[Description of Graph: The graph omitted in the EDGAR filing consists of a horizontal axis representing years between 1980 and 1996, and a vertical axis representing frequencies in MHz. The graph contains data points for x86 MPU, SDRAMs, EDOs and Page Made DRAMs. The data points for each of these technologies which are plotted in the graph are set forth below. In the graph, the data points for each respective technology are connected to form a line.
x86 MPU CLOCK FREQUENCY VS. DRAM DATA TRANSFER FREQUENCY
Measuring Period Page X86 (Year) Mode EDO SDRAM MPU - --------- ---- --- ----- --- 1980 5 5 1981 8 1982 10 1983 1984 12 1985 1986 8 16 1987 20 1988 25 1989 18 33 1990 1991 22 50 1992 66 1993 25 1994 28 100 1995 40 150 1996 33 50 66 200 - ------- |
(1) The material in this description is not deemed filed with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in any such filing.] Sources--
x86MPU: Microprocessor Report
Page Mode, EDO DRAM: Micron, NEC, Texas Instruments, Toshiba data sheets
SDRAM: measured clock/data rate in Dell PC
While microprocessors have undergone both manufacturing and architectural improvements, significant innovations for DRAMs have only occurred on the manufacturing side. DRAM manufacturers have been successful in increasing DRAM "density," or storage capacity, from roughly 1 Kbit (thousand bits) to 64 Mbits (million bits) per chip, thereby reducing the number of DRAMs required for a given amount of memory. However, corresponding architectural improvements necessary to increase DRAM data transfer rates to keep pace with increasing microprocessor speeds have not occurred.
Systems manufacturers have attempted to bridge the Performance Gap with a variety of performance-enhancing techniques. One approach is the use of SRAMs (static RAMs), which are faster but more expensive than DRAMs, to build cache memories. SRAM caches are effective for applications which repeatedly access a particular set of data, such as scientific and spreadsheet applications, but are not as effective for multimedia and other applications that must continually access new data. For example, for a multimedia application to display real-time video that is perceived as smooth motion by the human eye, a new image must be decompressed, displayed and then discarded approximately 30 times every second. Because such an application requires a high rate of transfer of constantly changing data and does not use data repetitively, SRAM caches do not provide an effective solution.
Another technique used to address the Performance Gap, the "wide bus" approach, relies on increasing the width of the "bus," or channel, through which data is passed to and from the processor/controller and the DRAMs. A wider bus will transfer proportionately more data than a narrower bus. Just as the capacity of a highway can be increased by adding more lanes, bus width can be increased by adding more external connections, or "pins." However, use of wider buses to increase the memory bandwidth creates several problems. First, the routing scheme for conventional DRAMs results in the wires on the printed circuit boards that have varying lengths and electrical loads that cause timing problems, known as "signal skew," as well as signal integrity problems. These problems become more pronounced with increases in pincount. Another problem inherent in wider buses is that larger pincount packages are more expensive to produce and require more expensive testers. Additionally, every pin on the package must connect to a bonding "pad" on the chip itself, typically at the edge of the chip. For smaller chips it may not be possible to put as many pads on the chip as is desired without increasing the die size and cost of the chip. Another problem relates to the number of DRAMs necessary to achieve the greater memory bandwidth associated with a wider bus. DRAM densities have been increasing rapidly and larger DRAMs typically have a lower cost per bit. For some applications, the most cost-effective solution for memory capacity may require only one or two DRAMs. However, limitations on the data transfer rate of a given DRAM often require that multiple DRAMs be used on a wide bus to provide sufficient memory bandwidth. By requiring more DRAMs to provide the desired memory bandwidth than are required to provide the desired memory capacity, the wide bus solution often results in the use of a greater number of smaller capacity DRAMs, which in turn results in a higher cost per bit.
Rambus believes that several major market trends will exacerbate the Performance Gap in the future. The increased number and performance of multimedia applications and other capabilities demanded by businesses and consumers require ongoing improvements in memory bandwidth, which Rambus believes cannot be achieved without significantly changing the DRAM interface architecture. The memory bandwidth required by current systems, such as home video games and PCs, can be hundreds of megabytes (million bytes) per second. These bandwidth requirements are already taxing, and in many cases exceeding, the limits of conventional DRAMs. The demand for memory bandwidth for PC main memory will soon exceed one gigabyte (billion bytes) per second due to continuing advances in microprocessor frequency, as well as software and architecture changes that shift much of the load for multimedia processing to the main memory subsystem. Rambus believes that these market trends have created a significant opportunity for a high-speed, cost-effective, scalable solution that addresses the widening Performance Gap.
THE RAMBUS SOLUTION
Rambus has created a revolutionary chip-to-chip interface architecture, which allows data to be transferred through a simplified bus at significantly higher frequencies than permitted by conventional technologies. Rambus has focused the application of its interface technology on the Performance Gap and licenses its interface technology to memory and logic semiconductor manufacturers, which incorporate this interface technology into their IC designs to supply systems companies with Rambus ICs. The key elements of the Rambus interface are RDDRAMs, RACs and the interconnecting circuitry known as the "Rambus Channel." While Rambus technology can be used to address a wide variety of chip-to-chip data transfer requirements, the largest immediate application is to connect logic circuits to memory in home video games, PCs, workstations and other electronic systems.
Key benefits of the Rambus solution are:
High Performance. Rambus interface technology currently allows data transfers of up to 600 megabytes per second between a logic IC and DRAMs by transferring data at a frequency of 600 MHz over a byte-wide bus known as the "Rambus Channel." System performance can be further enhanced by applying Rambus interface technology to multiple channels on a logic IC. For example, a Rambus-based logic IC can utilize four channels to achieve data transfer of up to 2.4 gigabytes per second. In addition, multiple DRAMs can be connected to each channel on a Rambus-enabled logic device to increase memory capacity. Rambus maintains ongoing research and development activities in conjunction with its licensees to further improve the performance of its interface technology.
Open Standard. Rambus interface technology is an open standard, with compatible Rambus ICs available to systems companies from any IC manufacturer that has obtained a license from Rambus. Rambus believes that systems companies benefit from having compatible Rambus ICs and a consistent implementation of the Rambus interface technology, available from multiple sources. Rambus also believes that making its technology available from established DRAM and logic IC companies facilitates the adoption of Rambus technology by systems companies.
Cost-Effectiveness. Rambus technology can enable systems companies to significantly improve system cost-effectiveness. Depending on the implementation, Rambus technology allows a reduction in the number of pins per logic device, the use of fewer DRAMs of greater density, a simplified circuit board design and layout and a smaller circuit board. According to a recent study by Mercury Research, an independent research organization, Rambus enables the lowest-cost 2 megabyte frame buffer DRAM alternative to traditional page mode DRAMs.
Complete Systems Solution. Rambus' solution is based on a system-wide, rather than a chip-level, perspective. Semiconductor companies have traditionally attempted to improve chip-level performance by increasing the "width," or number of pins, associated with a given DRAM, but this tends to increase the size, cost and complexity of the overall system. In contrast, Rambus has successfully increased memory bandwidth per pin, thereby increasing performance gains and cost savings when its technology is incorporated into a home video game, PC, workstation or other electronic system. As part of its complete systems solution approach, Rambus provides technical support to systems companies that incorporate Rambus technology into their products.
TARGET MARKETS AND APPLICATIONS
The high-speed interface technology Rambus has developed is applicable to data transfer between most semiconductor chips. The Company has initially chosen to concentrate the application of its technology on the interface between logic ICs and memory devices because of the acute performance needs and the relevant market sizes. According to Dataquest, the total market for DRAMs was $26 billion in 1996 and is expected to grow to $63 billion in 2000. While Rambus interface technology is useful in providing increased memory bandwidth in any electronic system, the Company believes that the systems which will best utilize the high bandwidth provided
by current Rambus technology are the relatively high-volume, low-cost systems in which the cost of the memory subsystems represents a significant portion of the selling price. To date, the principal applications for the Company's technology have been in the consumer multimedia, PC multimedia and workstation multimedia markets. These areas accounted for the sale of approximately $13,000, $11 million, and $444 million of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996, respectively. The Company believes significant opportunities to expand adoption of its technology exist in the PC main memory market segment and other markets.
MULTIMEDIA/GRAPHICS
The first generation of Rambus ICs has been targeted at consumer multimedia, PC multimedia and workstation multimedia because these are the applications which the Company believes are in most immediate need of the performance improvements that can be enabled by an increase in memory bandwidth. The Company also believes that systems running these applications, particularly high-volume, low-cost consumer electronics and PC multimedia systems, will benefit most from the significant improvement in the price/performance ratio that is enabled by Rambus technology.
Consumer Multimedia. Manufacturers of consumer multimedia products, such as home video games, are under constant competitive pressure to provide more sophisticated graphics and other multimedia features at low cost. Rambus believes that its interface technology provides consumer multimedia systems companies with a competitive advantage in meeting this challenge. Nintendo, Inc.'s new Nintendo 64 video game uses Rambus interface technology to deliver sophisticated 3D graphics and CD-quality audio at a retail selling price of less than $200. The high bandwidth delivered by RDRAMs enables the creation of a unified system and graphics memory subsystem. The Nintendo 64 began selling in June 1996 in Japan and in September 1996 in the United States, and had sold approximately 4 million units through the end of 1996.
PC Multimedia. Similarly, PC manufacturers are striving to meet market demand for increased multimedia performance at low cost. One aspect of this demand is the shift from 2D to 3D capability, and Mercury Research has estimated the market for 3D graphics controllers will grow from 3 million units in 1996 to over 100 million in 2000. In May 1996, Cirrus Logic began commercial shipments of its Laguna graphics controller, the first product in a planned family of VisualMedia PC graphics controllers using Rambus memory interface technology. The Laguna graphics controller has been adopted by Creative Labs, Inc. and others for use in add-in graphics accelerator cards for the PC market. Another Rambus licensee, Chromatic Research, Inc., has introduced a line of multimedia processors called Mpact. Chromatic has licensed Toshiba Corporation, LG Semicon Co., Ltd. and SGS-THOMSON Microelectronics, Inc., all of which are Rambus licensees, to build and sell these Rambus-based processors.
In August 1996, Microsoft Corporation published its "Talisman" PC reference design, which includes Rambus interface technology. Talisman is a set of technology specifications promulgated by Microsoft to allow multimedia PC systems running Microsoft software to provide multimedia performance previously available only on workstations. Rambus believes that this is a significant endorsement of its technology, although to date no commercial applications of Talisman have been announced or released and there is no assurance that any product will ever be developed based on this reference design or that any products developed will include Rambus interface technology.
Workstation Multimedia. Rambus interface technology significantly enhances the multimedia performance of workstations in a cost-effective manner. The first application of Rambus technology was the Impact line of 3D graphics controllers for workstations from Silicon Graphics, Inc. ("SGI"). SGI uses Rambus technology in the 3D graphics subsystem to help bring high-performance, high-quality graphics to entry-level workstations. Each subsystem uses a minimum of six RDRAMs and three Rambus-enabled logic ICs to achieve peak bandwidth of 3 gigabytes per second.
PC MAIN MEMORY
A key element of the Company's strategy is to penetrate the market segment for main memory in PCs. Dataquest estimates that over 72 million PCs were sold in 1996 and that demand will grow to over 130 million units by 2000. The Company believes that more than half of all DRAMs are currently used in PC main memory applications.
Development with Rambus Licensees. Rambus and a majority of its DRAM licensees are currently developing an advanced version of next-generation 64 Mbit RDRAMs which will be targeted at the PC main memory market segment. The Company believes that these devices will offer superior bandwidth compared to other solutions for PC main memory applications. These devices are not scheduled for mass production until at least 1999, and there can be no assurance that such devices will be successfully developed or that, if developed, will be successful in penetrating the market segment for PC main memory. See "Risk Factors--Dependence upon Limited Number of Licensees" and "--Future Dependence upon PC Main Memory Market Segment and Intel."
Intel Contract. In November 1996, Rambus entered into a development and license contract with Intel. The contract provides for the parties to cooperate in the development of a specification for the RDRAM to be developed by Rambus and its DRAM licensees which will be optimized for PC main memory applications. The contract also calls for Intel to use reasonable best efforts to develop a PC main memory controller designed for use with these RDRAMs. There can be no assurance that such a controller will be designed in time to meet market requirements or that the parties will be successful in specifying an RDRAM that will be built by Rambus licensees at all or in sufficient quantity to become a standard for PC main memory. See "Risk Factors--Future Dependence upon PC Main Memory Market Segment and Intel" and "Certain Transactions--Intel Contract."
OTHER
The Company believes that its technology, which enables high memory bandwidth at low cost, is well suited to a broad range of other applications. Other Rambus-based applications currently being developed include multifunction peripheral controllers for use in combination fax/copier/scanner/laser printer applications and networking equipment such as high-speed ethernet switches. There can be no assurance that such devices will be designed incorporating Rambus interface technology or that sales of such devices will be meaningful.
RAMBUS LICENSEES
Rambus licenses its technology on a nonexclusive and worldwide basis to semiconductor manufacturers which sell Rambus ICs to systems companies that have adopted Rambus technology. An important element of the Company's strategy is to license its technology broadly in order to establish Rambus interface technology as a standard and to provide systems companies with sources from established semiconductor companies for Rambus ICs. Rambus provides licenses to both DRAM manufacturers and logic IC manufacturers, which can license Rambus interface technology for use in producing RDRAMs and/or logic ICs containing RACs. At February 28, 1997, Rambus had a total of 19 licensees. To date, a majority of the Company's royalties has been derived from the sale of logic ICs incorporating RACs. If the Company is successful in its strategy to penetrate the PC main memory market, the Company expects that royalties from the sale of RDRAMs will eventually account for the largest portion of royalties.
Sales of Rambus ICs to systems companies, such as manufacturers of home video games, PCs, workstations and graphics boards, are not made by Rambus, but by semiconductor companies which are the Company's licensees. Systems companies do not need a license to incorporate Rambus ICs in their products. However, an important part of the Company's strategy is to maintain close ties to these systems companies to encourage the adoption of Rambus technology. See "Risk Factors--Dependence upon Limited Number of Licensees," "--Dependence upon Systems Companies," "--No Assurance of Adoption of Rambus Technology as an Industry Standard" and "Business--Target Markets and Applications."
RDRAM LICENSEES
The DRAM business is highly competitive, with approximately 20 major manufacturers located throughout the world. Rambus' licensees include nine DRAM manufacturers which collectively accounted for over 70% of worldwide DRAM sales in 1996. The Company's RDRAM licensees include:
RAMBUS DATE OF INITIAL
LICENSEE RDRAM LICENSE STATUS OF DEVELOPMENT
-------- --------------- ---------------------
Hitachi, Ltd. September 1994 64 Mbit RDRAM in development.
Hyundai Electronics December 1995 16/18 Mbit and 64 Mbit RDRAMs in development.
Industries Co., Ltd.
LG Semicon Co., Ltd. February 1994 16/18 Mbit RDRAMs beginning production. 64 Mbit
RDRAM in development.
Monolithic System December 1996 Specialized 16 Mbit multi-bank RDRAMs
Technology, Inc. in development.
("MoSys")
NEC Corporation July 1991 16/18 Mbit RDRAMs in production. 64 Mbit
RDRAM in development.
Oki Electric Industry December 1993 16/18 Mbit RDRAMs beginning production. 64 Mbit
Co., Ltd. RDRAM in development.
Samsung Electronics Co., December 1994 16/18 Mbit and 64 Mbit RDRAMs in development.
Ltd.
Toshiba Corporation October 1990 16/18 Mbit RDRAMs in production. 64 Mbit
RDRAM in development.
|
LOGIC IC LICENSEES
A Rambus license for logic ICs may be for all uses, or may be restricted to certain types of ICs such as ASICs or peripherals. Many of the RACs provided by Rambus for use in logic ICs have been developed first for a 0.5^ (micron, one millionth of a meter) process and then migrated to a 0.35^ process. In addition, the Company is currently working with certain licensees on 0.25^ RACs. Information regarding certain of the Company's logic IC licensees is provided in the table below.
RAMBUS DATE OF INITIAL
LICENSEE LOGIC IC LICENSE STATUS OF DEVELOPMENT
-------- ---------------- ---------------------
Chromatic Research, Inc. February 1994 Multimedia processors developed by
Chromatic are manufactured and sold by LG
Semicon and Toshiba. SGS-THOMSON is also
developing a multimedia processor based on
a Chromatic design.
Cirrus Logic Inc. October 1993 Graphics controllers in production.
IBM Corporation December 1995 Logic chip in development for third party
customer of ASIC design and foundry
services. RAC available as part of cell
library.
Intel Corporation November 1996 Main memory controller to be developed.
LG Semicon Co., Ltd. February 1994 Multimedia processor in production.
LSI Logic Corporation June 1994 RAC available as part of its cell library.
NEC Corporation July 1991 Logic chip in production for third party
customer of ASIC design and foundry
services. RAC available as part of cell
library.
SGS-THOMSON December 1996 Multimedia processor in development.
Microelectronics, Inc.
Toshiba Corporation October 1990 Multimedia processor in production. Logic
chip in development for third party
customer of ASIC design and foundry
services. RAC available as part of cell
library.
|
In addition to the licensees named in the two tables above, Rambus has other licensees who are developing proprietary products using Rambus technology and have chosen to keep their relationships with Rambus confidential until such products are introduced to the market.
While all current RDRAM and certain current logic IC licensees have fabrication facilities, some current and potential future logic licensees use third-party fabrication facilities. The Company has developed a version of its RAC for manufacture at Taiwan Semiconductor Manufacturing Company Limited ("TSMC"), the world's largest independent foundry. While not a Rambus licensee itself, TSMC will be able to manufacture Rambus-based ICs for fabless Rambus licensees.
RAMBUS BUSINESS MODEL AND STRATEGY
In order to establish Rambus interface technology as an industry standard, the Company has adopted an innovative business model in which it neither manufactures nor sells semiconductors incorporating the Company's technology. The Company licenses its technology on a nonexclusive and worldwide basis to semiconductor companies which manufacture and sell RDRAMs and logic ICs containing RACs to systems companies which have adopted Rambus technology. Systems companies are not required to obtain a Rambus license to incorporate Rambus ICs into their products.
The Rambus business model and strategy are designed to promote Rambus as an industry standard and are based on the following key elements:
Target Leading Systems Companies in Multiple Large Markets. The Company targets leading systems companies in markets that the Company believes represent the greatest potential for Rambus IC sales. The Company believes that making these market leaders successful in their adoption of Rambus technology will not only validate the Rambus technology as a practical, performance-enhancing and cost-effective solution, but will also place competitive pressure on other industry participants to adopt Rambus technology. The Company actively participates with its licensees in their marketing and selling efforts to systems companies, develops applications notes and other technical material to promote and support Rambus technology in the marketplace, and provides technical support, generally at no charge, to systems companies which have adopted Rambus technology. Leading systems companies which have adopted Rambus technology to date include Nintendo in the home video game market and SGI in the workstation market. Additionally, Rambus seeks to establish relationships with leading technology providers, such as Intel, Microsoft and Cirrus Logic, whose technologies have been or are expected to become widely adopted by systems companies. See "--Target Markets and Applications."
Provide Multiple Sources for RDRAMs. The Company licenses its technology broadly in order to provide systems companies with multiple sources for RDRAMs. For example, the Company currently has nine separate licensees, representing over 70% of total worldwide DRAM sales in 1996. The Company's license contracts generally require a licensee to develop a Rambus IC in order to keep its license. The Company believes that systems companies will be more inclined to adopt Rambus interface technology if it is available from established DRAM manufacturers with which systems companies already have relationships. The Rambus business model ensures the compatibility of all Rambus ICs and a consistent implementation of the Rambus interface technology, regardless of manufacturer.
Leverage Business Model by Sharing Research and Development Efforts with Licensees. Rambus believes that cooperative development efforts with its licensees allow the Company to improve its interface technology and bring it to market faster, cheaper and with broader support than would be possible if Rambus were to attempt to develop, manufacture or sell chips incorporating the Rambus interface technology on its own. While all the development of the fundamental technology and much of the specific process implementation has been done by Rambus, a significant portion of the specific process implementation has been accomplished by the partner licensees. By spreading the cost of developing Rambus technology among all Rambus licensees, which Rambus considers to be its partners in development, the Rambus business model permits the Company to maintain a relatively low cost structure and devote a relatively large portion of its resources to research and development efforts which are directly related to the Company's fundamental technology.
Generate Revenue through a Combination of Contract Fees and Royalties. Licensees generally pay a license fee to Rambus ranging from a few hundred thousand dollars for a narrow license covering a single logic product to millions of dollars for a license with broad coverage of Rambus technology. Part of these fees may be due upon the achievement of certain milestones, such as provision of certain deliverables by Rambus or production of chips by the licensee. In a few cases, the Company has received nonrefundable, prepaid royalties which will offset the earliest royalties due from the licensee. Rambus' contracts also typically provide for engineering service fees, which help pay the cost of developing the core technology. Licensees normally pay additional engineering service fees if Rambus provides the modification of its interface technology required for the licensee's specific chip manufacturing process. All Rambus license fees and engineering service fees are nonrefundable.
Royalties, which are generally a percentage of the revenues received by licensees on their sales of Rambus ICs, are normally payable by a Rambus licensee on sales occurring during the life of the Rambus patents being licensed. For a typical systems application of Rambus technology, the Company receives royalties from the sale of both logic ICs containing RACs and RDRAMs as they are shipped by Rambus licensees. Royalty rates range up to approximately 2.5% for RDRAMs and 5% for logic ICs, and in some cases may decline based on the
passage of time or on the total volume of Rambus ICs shipped. The exact rate and structure of a royalty arrangement with a particular licensee depend on a number of factors, including the amount of the license fee to be paid by the licensee and the marketing and engineering commitment made by the licensee.
Contract fees have provided the majority of the capital needed to date by the Company to develop its fundamental technology, and the Company believes that its business model is well suited to continue funding future development. However, there is no assurance that the Company's current partner licensees will generate revenue, or that the Company will be able to add new license contracts in the future, at levels sufficient to provide significant funding for further development activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Maintain Technology Leadership. Rambus has pioneered a unique and revolutionary solution to the Performance Gap. Rambus believes that the factors which created this opportunity, including the accelerating improvements in microprocessor speeds and DRAM densities and business and consumer demand for ever increasing performance at lower cost, will continue to require innovative technology. The Company is committed to continuing research and development efforts, both internally and in conjunction with its partner licensees, to further improve the Rambus interface technology. Approximately three quarters of the Company's employees have technical degrees, and more than half of the Company's employees have graduate technical degrees. The Company plans to continue its emphasis on research and development, and currently more than half of the Company's engineering staff is assigned to developing future generations of the Company's fundamental technology.
Pursue System-Level Approach. The Company believes that the value of its technology to systems companies as a cost-effective way to improve system performance is a result of the Company's system-level approach. Rather than focusing exclusively on chip-level improvements, the Company designs its technology with the goal of improving the overall performance and cost effectiveness of systems such as home video games, PCs and workstations which incorporate the technology. Rambus intends to continue this approach in its future development efforts.
TECHNOLOGY AND PRODUCTS
ARCHITECTURE
Rambus has developed a revolutionary chip-to-chip interface technology which combines a new bus architecture with major improvements in signaling technology. Unlike other approaches, address, data and control information is transferred together through a relatively narrow bus between a RAC and one or more RDRAMs. To achieve a high bandwidth over the narrow bus, Rambus developed a protocol for moving data rapidly and efficiently. To eliminate signal skew, clock and data signals are sent in parallel over a precisely defined and controlled route. Rambus' technological innovations, including the use of low signal swings, data transfer on both edges of a synchronizing clock pulse and the use of on-chip compensation circuits, all contribute to achieving a peak memory bandwidth of 600 megabytes per second per channel. The Company believes that its technology is scalable, and that higher peak bandwidths can be achieved in the future.
The Company and its licensees are developing an extension of Rambus interface technology, scheduled for introduction in mid-1997 and called "Concurrent Rambus" technology, for both 16/18 Mbit and 64 Mbit generation RDRAMs, which will provide more efficient use of the high peak bandwidth currently provided by the base technology for graphics and multimedia applications. In addition, Rambus and Intel are currently working on the definition of another extension to the Rambus interface technology, scheduled for introduction in late 1998 and called "Direct Rambus" technology, for 64 Mbit generation RDRAMs, which will be further optimized for PC main memory applications.
RAMBUS DESIGN METHODOLOGY
When developing either a generalized layout database for a new product or an optimized implementation for a specific process, Rambus designers apply a rigorous design methodology intended to accelerate the development process, maintain consistent quality and promote the development and sharing of design expertise among the engineering staff. Rambus design engineers generally use a common set of third-party and custom computer aided design tools on a network of computer workstations in order to allow them to share common resources. The Company has developed proprietary software to assist in the modeling, simulation, layout and verification of circuit designs. Additionally, the Company promotes design integrity and sharing of expertise by subjecting designs to a series of peer reviews and simulation and verification tests at different stages of development. When a process-specific design has been developed by Rambus, each implementation in silicon is generally tested by the Company on high-speed testers in order to verify the device against the design specifications.
LICENSEE DESIGN METHODOLOGY
Rambus interface technology has been developed to allow semiconductor companies to use familiar, widely-available design tools and conventional techniques when designing their Rambus-enabled chips. A new Rambus licensee receives an implementation package from the Company which contains all the information needed to develop a Rambus IC in the licensee's process. There are separate implementation packages for RDRAMs and for RACs. An implementation package includes a specification, a generalized circuit layout database for the particular version of the RDRAM or RAC which the licensee intends to develop, test parameters and, for RDRAMs, a DRAM core interface specification. Many licensees have contracted to have Rambus produce the specific implementation required to optimize the generalized circuit layout for the licensee's manufacturing process. In such cases, the licensee provides specific design rules and transistor models which Rambus designers use to integrate RDRAM or RAC circuits into the licensee's process. However, Rambus anticipates that as licensees become more familiar with the Rambus technology, they will be able to do more of the implementation work without Rambus' assistance.
MANUFACTURING AND YIELDS
Rambus has developed its technology to be manufacturable using familiar, industry-standard CMOS semiconductor processes. For this reason the Company believes that the wafer fabrication yields of RDRAMs and logic products containing RACs are consistent with those for similar products in the same manufacturing facility. However, because of the extra Rambus interface circuitry, an RDRAM chip is somewhat larger than a standard DRAM. Therefore, a manufacturer will generally produce fewer RDRAMs than standard DRAMs for a given wafer size and an RDRAM chip will be somewhat more expensive than the standard version. Rambus believes that this cost premium is about 10% to 20% for the current 16 Mbit generation, but will be reduced to about 5% for 64 Mbit RDRAMs. In addition, RDRAM manufacturers are responsible for their own manufacturing processes and Rambus has no role in the manufacture of RDRAMs. For example, Rambus has no influence on decisions in regard to any process changes or on whether or when to "shrink" or otherwise change a design to reduce the cost of the chips.
PACKAGING AND CIRCUIT BOARD LAYOUT
Current implementations of RDRAMs and Rambus logic ICs can be packaged in widely available, inexpensive packaging. System companies connect RDRAMs to Rambus logic ICs using normal printed circuit board ("PCB") materials and manufacturing techniques. System companies are provided with detailed specifications from Rambus on circuit board layout and construction. Circuit boards can be fabricated and assembled using standard PCB techniques and equipment.
RESEARCH AND DEVELOPMENT
The ability of the Company to compete in the future will be substantially dependent on its ability to advance its interface technology in order to meet changing market needs. To this end, Company engineers are involved in developing new versions of the Rambus interface technology which will allow chip-to-chip data transfer at higher speeds as well as provide other improvements. The Company has assembled a team of highly skilled engineers whose activities are focused on further development of Rambus interface technology as well as adaptation of current technology to specific licensees' processes. Because of the complexity of these activities, the design and development process at Rambus is a multi-disciplinary effort requiring expertise in computer architecture, digital and analog circuit design and layout, DRAM and logic semiconductor process characteristics, packaging, PCB routing and high-speed testing techniques.
As of December 31, 1996, Rambus had 75 employees in the engineering department. Approximately two thirds of these employees have advanced technical degrees. In fiscal 1994, 1995 and 1996 and the first three months of fiscal 1997, research and development expenses were approximately $3.1 million, $3.1 million, $5.2 million and $2.3 million, respectively. In addition, because the Company's license agreements often call for engineering support by Rambus, a substantial portion of the Company's total engineering costs has been allocated to cost of contract revenues, even though these engineering efforts have direct applicability to Rambus' technology development. The Company expects that it will continue to invest substantial funds on research and development activities. Currently, more than half of the Company's technical staff is primarily focused on the development of technologies which are not currently in production. There can be no assurance that new versions of the Rambus interface technology can be developed and introduced by the Company's licensees in a timely fashion or that such new technology will be accepted by the market. Moreover, the end markets for the Company's technology, particularly the home video game and PC markets, are subject to rapid technological change and there can be no assurance that as such markets change the Company's interface technology will remain current and suitable.
COMPETITION
The semiconductor industry is intensely competitive and has been characterized by price erosion, rapid technological change, short product life cycles, cyclical market patterns and increasing foreign and domestic competition. Most major DRAM manufacturers are developing higher-frequency versions of standard DRAMs such as EDO, SDRAMs and SGRAMs which compete with RDRAMs. These DRAM manufacturers include most Rambus DRAM licensees, as well as other major DRAM manufacturers such as IBM, Texas Instruments Inc. and Micron Technologies, Inc. Most of these companies are much larger and have better access to financial, certain technical and other resources than Rambus. Additional high-speed DRAMs have recently been introduced by other semiconductor companies for specialized applications.
The Company believes that its success in establishing a new high-speed memory interface has been due to the systems approach it has taken to solving the application needs of companies in home video game, PC and other electronic systems businesses. However, the Company believes competitors have begun to take a similar approach. The Company believes that its principal competition may come from its licensees and prospective licensees, many of which are evaluating and developing products based on alternative technologies. Many DRAM suppliers have indicated that they are developing a new technology called Double Data Rate ("DDR") SDRAMs, aimed at doubling the memory bandwidth from SDRAMs without increasing the clock frequency. In addition, a consortium including both large DRAM manufacturers and systems companies is promoting a specification for an alternative high-speed interface standard called SyncLink. To the extent that these alternative technologies provide comparable system performance at lower cost than RDRAMs, or do not require the payment of comparable royalties, the Company's licensees and prospective licensees may adopt and promote the alternative technologies. There can be no assurance that the Company's future competition will not have a material adverse effect on the Company's business, financial condition and results of operations. In addition, certain semiconductor companies have recently introduced a new kind of IC which combines logic and DRAM on the same chip. Such chips, called "embedded DRAM," eliminate the need for any chip-to-chip interface and
are primarily being used for graphics applications. Embedded DRAMs are well suited for applications where component space saving and power consumption are important, such as in the graphics subsystems of notebook PCs. There can be no assurance that competition from embedded DRAMs will not increase in the future.
PATENTS AND INTELLECTUAL PROPERTY PROTECTION
The Company has an active program to protect its proprietary technology through the filing of patents. At February 28, 1997, the Company held 29 United States patents on various aspects of its technology, with expiration dates ranging from 2010 to 2014. At February 28, 1997, the Company had applications for 32 United States patents pending. The Company's United States patents do not prevent the manufacture or sale of Rambus-based ICs abroad. At February 28, 1997, the Company held six foreign patents and had additional foreign patent applications pending in Taiwan, Korea, Japan and various other jurisdictions. There can be no assurance that the Company's pending United States or foreign patent applications or any future United States or foreign patent applications will be approved, that any issued patents will protect the Company's intellectual property or will not be challenged by third parties, or that the patents of others will not have an adverse effect on the Company's ability to do business. Furthermore, there can be no assurance that others will not independently develop similar or competing technology or design around any patents that may be issued to the Company.
The Company attempts to protect its trade secrets and other proprietary information through agreements with licensees and systems companies, proprietary information agreements with employees and consultants and other security measures. The Company also relies on trademarks and trade secret laws to protect its intellectual property. Despite these efforts, there can be no assurance that others will not gain access to the Company's trade secrets, or that the Company can meaningfully protect its intellectual property. In addition, effective trade secret protection may be unavailable or limited in certain foreign countries. Although the Company intends to protect its rights vigorously, there can be no assurance that such measures will be successful.
Rambus believes that it is important to develop and maintain a uniform RDRAM memory interface standard. The Company's contracts generally prevent a licensee from using licensee-developed patented improvements related to Rambus technology to block other licensees from using the improvements or requiring them to pay additional royalties related to their use of Rambus interface technology. Specifically, the contracts generally require licensees to grant to Rambus a royalty-free cross-license on patented licensee intellectual property related to the implementation of Rambus interface technology, which Rambus sublicenses to other licensees which have entered into similar arrangements. Not all licensees have granted Rambus cross-licenses and there is no assurance that such a blocking arrangement will not occur in the future.
The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. While the Company has not received formal notice of any infringement of the rights of any third party, questions of infringement in the semiconductor field involve highly technical and subjective analyses. Litigation may be necessary in the future to enforce the Company's patents and other intellectual property rights, to protect the Company's trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, and there can be no assurance that the Company would prevail in any future litigation. Any such litigation, whether or not determined in the Company's favor or settled by the Company, would be costly and would divert the efforts and attention of the Company's management and technical personnel from normal business operations, which would have a material adverse effect on the Company's business, financial condition and results of operations. Adverse determinations in litigation could result in the loss of the Company's proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties or prevent the Company from licensing its technology, any of which could have a material adverse effect on the Company's business, financial condition and results of operations. Moreover, the laws of certain foreign countries in which the Company's technology is or may in the future be licensed may not protect the Company's intellectual property rights to the same extent as the laws of the United States, thus increasing the possibility of infringement of the Company's intellectual property.
In any potential dispute involving the Company's patents or other intellectual property, the Company's licensees could also become the target of litigation. While the Company generally does not indemnify its licensees, some of its license agreements require the Company to provide technical support and information to a licensee which is involved in litigation involving use of Rambus technology. The Company is bound to indemnify certain licensees under the terms of certain license agreements, and the Company may agree to indemnify others in the future. The Company's support and indemnification obligations could result in substantial expenses to the Company. In addition to the time and expense required for the Company to supply such support or indemnification to its licensees, a licensee's development, marketing and sales of Rambus ICs could be severely disrupted or shut down as a result of litigation, which in turn could have a material adverse effect on the Company's business, financial condition and results of operations.
SALES AND MARKETING
Consistent with the Company's business model, sales and marketing activities are focused on developing relationships with potential licensees and on participating with existing licensees in marketing, sales and technical efforts directed to systems companies. In many cases, Rambus must dedicate substantial resources to market to and support systems companies. The Company's sales and marketing efforts include applications engineering and other technical support for systems companies, as well as trade shows, advertising and other traditional marketing activities.
EMPLOYEES
As of December 31, 1996 the Company had 108 employees, including three in Japan. Of this total, 75 were in engineering, 21 were in marketing and sales, and 12 were in finance and administration. Overall, approximately three quarters of the Company's employees have technical degrees, and more than half of the Company's employees have advanced technical degrees. The Company's future success will largely be dependent on its ability to attract, retain and motivate highly qualified technical and management personnel who are in great demand in the semiconductor industry. The Company's employees are not represented by any collective bargaining agreements and the Company has never experienced a work stoppage. The Company believes that its employee relations are good.
FACILITIES
The Company leases approximately 31,000 square feet in one building in Mountain View, California for its principal engineering, marketing and administrative operations. The lease expires in February 2005, with an option to extend the lease for an additional five years. The Company also leases space in Tokyo for an office which provides sales and technical support to systems companies in Japan. The Company expects that it will be required to seek additional space to support operations within the next twelve months and believes that it will not have difficulty in securing such additional facilities.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY PERSONNEL
The executive officers, directors and key personnel of the Company, and their ages and positions as of December 31, 1996, are as follows:
NAME AGE POSITION
---- --- --------
Geoff Tate(1)........... 42 President, Chief Executive Officer and Director
Gary Harmon............. 59 Vice President, Finance, Chief Financial Officer and Secretary
Ed Larsen............... 44 Vice President, Human Resources
David Mooring........... 38 Vice President, Business Development
Allen Roberts........... 41 Vice President, Engineering
Subodh Toprani.......... 42 Vice President, Marketing
Takahiro Kamo........... 62 Chairman, Rambus K.K.
William Davidow(2)(3)... 61 Chairman of the Board of Directors
Bruce Dunlevie(2)(3).... 40 Director
P. Michael Farmwald..... 42 Director
Charles Geschke(2)(3)... 57 Director
Mark Horowitz........... 39 Director
|
Geoff Tate has served as President, Chief Executive Officer and Director since joining the Company in May 1990. From February 1989 to January 1990, Mr. Tate served as Senior Vice President and Corporate Officer, Microprocessor and Peripherals with Advanced Micro Devices, Inc. ("AMD"), a semiconductor manufacturer. From 1979 to 1989, Mr. Tate served in various marketing and product line management positions with AMD. Mr. Tate holds a B.Sc. degree in Computer Science from the University of Alberta and an M.B.A. from the Harvard Graduate School of Business Administration.
Gary Harmon has served as Vice President, Finance, Chief Financial Officer and Secretary since joining the Company in March 1993. From November 1992 to March 1993, Mr. Harmon was an independent consultant. From April 1992 to November 1992, he served as Senior Vice President--Finance and Chief Financial Officer for Novellus Systems Inc., a manufacturer of semiconductor equipment. From October 1991 to March 1992, he served as Executive Vice President-- Finance and Chief Financial Officer of Digital Microwave Inc., a manufacturer of telecommunications equipment. From 1989 to 1991, Mr. Harmon served as Executive Vice President--Finance and Chief Financial Officer and was a co- founder of International Golf Partners, a golf course development company. From 1970 to 1989, Mr. Harmon served in various positions with electronics manufacturer Avantek, Inc., including Senior Vice President--Finance, Secretary and director. Mr. Harmon holds a B.S. degree in Electrical Engineering from Stanford University and an M.B.A. from the Harvard Graduate School of Business Administration.
Ed Larsen has served as Vice President, Human Resources, since joining the Company in September 1996. From May 1995 to August 1996, he served as Director, Human Resources for Cirrus Logic, Inc., a semiconductor manufacturer. From June 1991 to July 1993 and May 1994 to May 1995, Mr. Larsen was an independent consultant. From July 1993 to April 1994, he served as Director, Human Resources for Zilog, Inc., a semiconductor manufacturer. Mr. Larsen has also held various human resources positions with VLSI Technology and Motorola. Mr. Larsen holds a B.S. degree in Business Administration from the University of Minnesota.
David Mooring joined the Company in February 1991 as Vice President, Marketing and Sales, and since May 1994 has served as Vice President, Business Development. From 1989 to 1991, he served as Vice President of Marketing and Sales at Vitesse Semiconductor, Inc., a semiconductor manufacturer. From 1980 to 1989,
Mr. Mooring held various marketing and sales positions at Intel Corporation. Mr. Mooring holds a B.S. degree in Economics from the University of Santa Clara, an M.B.A. from Pepperdine University and an M.S. degree in Computer Engineering from the University of Southern California.
Allen Roberts has served as Vice President, Engineering since joining the Company in February 1991. In 1986, he co-founded FTL which merged that year with MIPS Computer Systems, Inc. ("MIPS"). He served as Director of High-End Engineering at MIPS from 1986 until 1991. Mr. Roberts has also held various engineering positions at Elxsi Inc., Infotek Systems and the Jet Propulsion Laboratory. Mr. Roberts holds a B.S. degree in Electrical Engineering from Stanford University.
Subodh Toprani has served as Vice President, Marketing since joining the Company in May 1994. From February 1992 to April 1994, Mr. Toprani served as Director of Marketing and Systems Engineering with the Personal Computer Products Division of AMD. From 1982 to 1992, Mr. Toprani served in various field engineering and marketing positions with AMD. He has also held various engineering positions with Bally Manufacturing Corp., a manufacturer of gaming and leisure equipment, and Gaming Devices Inc., a manufacturer of gaming equipment. Mr. Toprani holds a B.S. degree in Physics from St. Xavier's College of Bombay and B.S. and M.S. degrees in Electrical Engineering from the Illinois Institute of Technology.
Takahiro "Tom" Kamo is an independent consultant and has served as Chairman of the Company's Japanese subsidiary, Rambus K.K., since June 1991. Mr. Kamo is not deemed an executive officer of the Company for purposes of Section 16 of the Exchange Act or Rules 144 and 701 promulgated under the Securities Act. In 1974, Mr. Kamo established Intel Corporation's Japanese subsidiary, Intel Japan K.K., and served as its President and Vice Chairman. In 1988, he was elected Chairman of Intel Japan K.K. and served in this capacity until his retirement in 1990. In 1963, Mr. Kamo co-founded Tokyo Electron Laboratories ("TEL"), a Japanese importer/exporter of electronic products. He later founded TEL Engineering, a subsidiary of TEL involved in the design and manufacturing of semiconductor production equipment, where he served as President until 1974. Mr. Kamo holds a B.S. degree in Electrical Engineering from Waseda University in Tokyo.
William Davidow has served as Chairman of the Board of Directors since the Company was founded in March 1990. Since 1985, Dr. Davidow has been a general partner of Mohr, Davidow Ventures, a venture capital firm. From 1973 to 1985, he held a number of management positions at Intel Corporation, including Senior Vice President of Marketing and Sales, Vice President of the Microcomputer Division and Vice President of the Microcomputer Systems Division. Dr. Davidow holds A.B. and M.S. degrees in Electrical Engineering from Dartmouth College and a Ph.D. in Electrical Engineering from Stanford University. He also serves as a director of Vantive Corporation and several privately held companies.
Bruce Dunlevie has served as a director of the Company since its founding in March 1990. He has been a member of the venture capital firm Benchmark Capital since April 1996, and a general partner of the venture capital firm Merrill, Pickard, Anderson & Eyre since 1989. Mr. Dunlevie also served as Vice President and General Manager of the Personal Computer Systems Division of Everex Systems, a personal computer manufacturer. He holds a B.A. degree in History from Rice University and an M.B.A. from Stanford University. Mr. Dunlevie also serves as a director of Geoworks, an operating systems software company, and several privately held companies.
P. Michael Farmwald has served as a director since co-founding the Company in March 1990, and as Vice President and Chief Scientist from March 1990 to November 1993. He co-founded Chromatic Research Inc., a privately held developer of media processors for the PC industry, in November 1993, where he currently holds the title of Visionary and serves as a director. From 1988 to 1989, Dr. Farmwald was an associate professor of Electrical and Computer Engineering at the University of Illinois. In 1986, he co-founded FTL which merged that year with MIPS. From 1986 to 1988, Dr. Farmwald was Chief Scientist for High End Systems at MIPS. Dr. Farmwald holds a B.S. degree in Mathematics from Purdue University and a Ph.D. in Computer Science from Stanford University. He also serves as a director of a privately held company.
Charles Geschke has served as a director of the Company since February 1996. He is a co-founder of Adobe Systems Incorporated, a software company, and has served as a director of that company since 1982, Chief Operating Officer from 1986 to 1995 and President since 1989. Prior to 1982, Dr. Geschke held various positions with Xerox's Palo Alto Research Center, including Manager of the Imaging Sciences Laboratory. He holds an A.B. degree in Classics and an M.S. degree in Mathematics from Xavier University of Ohio, and received his Ph.D. in Computer Science from Carnegie-Mellon University. Dr. Geschke also serves as a director of a privately held company.
Mark Horowitz has served as a director since co-founding the Company in March 1990 and as Vice President from March 1990 to May 1994 and currently continues to serve in a part-time capacity as a member of the technical staff. Dr. Horowitz has taught at Stanford University since 1984 where he is currently professor of Electrical Engineering. He holds B.S. and M.S. degrees in Electrical Engineering from Massachusetts Institute of Technology and received his Ph.D. in Electrical Engineering from Stanford University.
CLASSIFIED BOARD
The Company's Amended and Restated Certificate of Incorporation provides for a Board of Directors consisting of two classes serving two-year staggered terms. Class I consists of Mr. Dunlevie, Dr. Geschke and Dr. Horowitz. Class II consists of Dr. Davidow, Dr. Farmwald and Mr. Tate. The initial term of office of the Class I directors expires at the annual meeting of stockholders in calendar 1998. The initial term of office of the Class II directors expires at the annual meeting of stockholders held in calendar 1999.
BOARD COMMITTEES
The Company's Board of Directors the ("Board") has an Audit Committee, a Compensation Committee and a Stock Option Committee. The Audit Committee, currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke, reviews the internal accounting procedures of the Company and consults with and reviews the services provided by the Company's independent auditors. The Compensation Committee, currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke, reviews and recommends to the Board the compensation and benefits of all officers, directors and consultants of the Company and reviews general policy relating to compensation and benefits of the Company. The Compensation Committee also administers the issuance of stock options and other awards under the Company's 1997 Stock Plan and 1997 Employee Stock Purchase Plan. The Stock Option Committee, currently comprised of Mr. Tate, administers the grant of stock options under the Company's 1997 Stock Plan to all employees other than executive officers, provided that options granted by the Stock Option Committee shall not exceed 25,000 shares per year to any employee.
DIRECTOR COMPENSATION
Board members do not receive any cash fees for their service on the Board or any Board committee, but they are entitled to reimbursement of all reasonable out-of-pocket expenses incurred in connection with their attendance at Board and Board committee meetings. All Board members are eligible to receive stock options pursuant to the discretionary option grant program in effect under the Company's 1997 Stock Plan, and outside directors receive stock options pursuant to the automatic option grant program in effect under the 1997 Stock Plan. During fiscal 1996, in connection with joining the Company's Board of Directors, Dr. Geschke was granted an option for the purchase of 50,000 shares of Common Stock at an exercise price of $4.00 per share. In February 1997, Dr. Davidow, Mr. Dunlevie and Dr. Geschke were granted options for the purchase of 10,000 shares, 35,000 shares and 10,000 shares of Common Stock, respectively, at an exercise price of $8.00 per share. See "Management--Stock Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee reviews and approves the compensation and benefits for the Company's executive officers, administers the Company's stock option and stock purchase plans and makes
recommendations to the Board of Directors regarding such matters. The Committee is currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke. No interlocking relationship exists between any member of the Company's Compensation Committee and any member of any other company's board of directors or compensation committee, except as set forth in "Certain Transactions--Transactions with Directors, Executive Officers and 5% Security Holders--Chromatic Research, Inc.".
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law.
Delaware law provides that a corporation's certificate of incorporation may
contain, and the Company's Amended and Restated Certificate of Incorporation
does contain, a provision eliminating or limiting the personal liability of a
director for monetary damages for breach of their fiduciary duties as
directors, except for liability (i) for any breach of their duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith for which involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper
personal benefit.
The Company's Amended and Restated Bylaws provide that the Company shall indemnify its directors, officers, employees and agents to the fullest extent permitted by law. The Company believes that the indemnification under its Amended and Restated Bylaws covers at least negligence and gross negligence on the part of indemnified parties.
The Company has entered into agreements to indemnify its directors and officers, in addition to the indemnification provided for in the Company's Amended and Restated Bylaws. These agreements, among other things, indemnify the Company's directors and officers for certain expenses (including attorney fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Company, arising out of such person's services as a director or officer of the company, any subsidiary of the Company or any other company or enterprise to which the person provides services at the request of the Company. The Company believes that these provisions and agreements are necessary to attract and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any director, officer, employee or agent of the Company where indemnifications will be required or permitted. The Company is not aware of any threatened litigation or proceeding that might result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding the compensation of the Company's Chief Executive Officer and each of the other four most highly compensated executive officers (collectively, the "Named Executive Officers") whose annual compensation (salary and bonus) for services rendered in all capacities to the Company exceeded $100,000 for the fiscal year ended September 30, 1996:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) OPTIONS(#) COMPENSATION(2)
--------------------------- ---------- ---------- ------------ ---------------
Geoff Tate.................. $ 215,000 $ 32,789 -- $2,656
President and Chief
Executive Officer
Gary Harmon................. 154,425 28,189 6,500 1,684
Vice President, Finance and
Chief Financial Officer
David Mooring............... 149,705 53,424 11,500 2,047
Vice President, Business
Development
Allen Roberts............... 178,266 26,235 15,500 2,409
Vice President, Engineering
Subodh Toprani.............. 165,000 24,721 10,500 2,331
Vice President, Marketing
|
OPTION GRANTS IN FISCAL 1996
The following table sets forth certain information regarding stock options
granted to each of the Named Executive Officers for the fiscal year ended
September 30, 1996.
INDIVIDUAL GRANTS(1)
-------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR(3) PER SHARE(4) DATE 5% 10%
---- ---------- -------------- ------------ ---------- ---------- ----------
Geoff Tate.............. -- -- -- -- -- --
Gary Harmon............. 6,500 2.39% $3.00 12/4/05 $ 12,263 $ 31,078
David Mooring........... 11,500 4.22 3.00 12/4/05 21,697 54,984
Allen Roberts........... 15,500 5.69 3.00 12/4/05 29,244 74,109
Subodh Toprani.......... 10,500 3.85 3.00 12/4/05 19,810 50,203
|
AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the shares acquired and the value realized on each exercise of stock options during the year ended September 30, 1996 and the year-end number and value of exercisable and unexercisable options:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 9/30/96(1) AT 9/30/96(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Geoff Tate.............. -- -- 497,955 213,334 $2,402,657 $981,336
Gary Harmon............. -- -- 45,000 45,500 213,750 187,750
David Mooring........... -- -- 75,208 101,292 351,257 404,043
Allen Roberts........... 50,000 $193,500 269,738 135,762 1,293,576 546,424
Subodh Toprani.......... -- -- -- 70,500 -- 288,000
|
STOCK PLANS
1990 Stock Plan
The Company's 1990 Stock Plan (the "1990 Stock Plan") provides for the grant to employees of incentive stock options and the grant of nonstatutory stock options to employees and consultants of the Company. Stock Purchase Rights ("SPRs") may also be granted under the 1990 Stock Plan. As of December 31, 1996, an aggregate of 6,875,000 shares of Common Stock has been reserved for issuance under the 1990 Stock Plan, 3,024,007 shares had been issued upon the exercise of stock options under the 1990 Plan, and options to purchase an aggregate of 3,302,041 shares of Common Stock were outstanding under the 1990 Stock Plan. Subsequent to December 31, 1996, the Board of Directors granted options to purchase 116,500 shares of Common Stock under the 1990 Stock Plan. No SPRs have been granted under the 1990 Stock Plan. The Board of Directors has determined that no further options or SPRs will be granted under the 1990 Stock Plan after this offering. Any shares underlying options granted under the 1990 Stock Plan that expire or are cancelled, or any unvested shares that are repurchased by the Company under the 1990 Stock Plan, will not be reissued.
The 1990 Stock Plan may be administered by the Board of Directors or a committee designated by the Board (the "1990 Stock Plan Administrator."). Options and SPRs granted under the 1990 Stock Plan are not generally transferable by the optionee except by will or by the laws of descent and distribution and are exercisable during the life of the optionee only by the optionee. Options granted under the 1990 Stock Plan must be exercised within 90 days of the end of the optionee's status as an employee or consultant to the Company, or within twelve months after such optionee's death or disability, but in no event later than the expiration of the option term. The exercise price of all options and SPRs granted under the 1990 Stock Plan was determined by the 1990 Stock Plan Administrator. With respect to any participant who owns stock possessing more than ten percent of the voting power of all classes of the Company's outstanding capital stock (a "10% Stockholder"), the exercise price of any option granted must equal at least 110% of the fair market value on the grant date. The exercise price of incentive stock options for all other employees shall be no less than 100% of the fair market value per share on the date of the grant. The exercise price of nonstatutory stock options must equal at least 85% of the fair market value on the grant date. The maximum term of an option granted under the 1990 Stock Plan may not exceed ten years from the date of grant (five years in the case of an incentive stock option granted to a
10% Stockholder). The 1990 Stock Plan Administrator determines the vesting schedule of all options granted under the 1990 Stock Plan. The 1990 Stock Plan requires the Board to determine the times and conditions at which options can be exercised, and the option agreements under the 1990 Stock Plan generally allow for early exercise of all options granted under such plan if the optionee executes a Restricted Stock Purchase Agreement upon such early exercise.
1997 Stock Plan
The Company's 1997 Stock Plan (the "1997 Stock Plan") was adopted by the
Board of Directors in February 1997 and approved by the stockholders in March
1997. The 1997 Stock Plan provides for the grant of incentive stock options to
employees (including officers and employee directors) and for the grant of
nonstatutory stock options and SPRs to employees, directors and consultants. A
total of 1,000,000 shares of Common Stock has been reserved for issuance under
the 1997 Stock Plan, plus an annual increase as of the first day of each
fiscal year during the term of the 1997 Stock Plan equal to the lesser of (i)
the number of shares needed to restore the maximum aggregate number of shares
which may be optioned and sold under the 1997 Stock Plan to 1,000,000 shares,
(ii) four percent (4%) of the outstanding shares on such date or (iii) a
lesser amount determined by the Board. Prior to this offering, there were no
options or SPRs outstanding under the 1997 Stock Plan.
The 1997 Stock Plan may be administered by the Board of Directors or a committee designated by the Board (the "Administrator"). Options and SPRs granted under the 1997 Stock Plan are not generally transferable by the optionee except by will or by the laws of descent and distribution, and are exercisable during the lifetime of the optionee only by such optionee. Options granted under the 1997 Stock Plan must be exercised within three months of the end of the optionee's status as an employee, director or consultant of the Company, or within twelve months after such optionee's death or disability, but in no event later than the expiration of the option term. The exercise price of all incentive and nonstatutory stock options granted under the 1997 Stock Plan shall be determined by the Administrator. With respect to any participant who owns stock possessing more than ten percent of the voting power of all classes of the Company's outstanding capital stock (a "10% Stockholder"), the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date. The exercise price of incentive stock options and nonstatutory stock options for all other employees shall be no less than 100% of the fair market value per share on the date of the grant. The maximum term of an option granted under the 1997 Stock Plan may not exceed ten years from the date of grant (five years in the case of an incentive stock option granted to a 10% Stockholder). In the case of SPRs, unless the Administrator determines otherwise, the Company shall have a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or disability). Such repurchase option lapses at a rate determined by the Administrator. The purchase price for shares repurchased by the Company shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. In the event of a merger or sale of substantially all of the assets of the Company, the acquiring or successor corporation must either assume the outstanding options and SPRs under the 1997 Stock Plan or substitute equivalent options or SPRs to purchase shares of the acquiring or successor corporation (or a parent or subsidiary of the acquiring or successor corporation). If an employee is involuntarily terminated by the acquiring or successor corporation within twelve months of the merger or asset sale (other than for cause), or if such acquiring or successor corporation refuses to substitute or assume outstanding options or SPRs, the employee's options and SPRs fully vest and become immediately exercisable.
The 1997 Stock Plan also provides for an automatic grant of an option to purchase 10,000 shares of Common Stock (the "First Option") to each non- employee director who becomes a non-employee director after the effective date of the 1997 Stock Plan provided that an employee director who becomes a non- employee director is not eligible for the First Option. In addition, each non- employee director shall automatically be granted an option to purchase 5,000 shares (a "Subsequent Option") on October 1 of each year provided he or she is then a non-employee director and, provided further, that on such date he or she has served on the Board for at least six months. First Options and each Subsequent Option shall have a term of ten years. One-eighth of the shares subject to the First Option and each of the Subsequent Options shall vest on the date six months after the grant of the option, and an additional 1/48 of the shares subject to the option shall become exercisable each
month thereafter, provided that the optionee continues to serve as a non- employee director through and on such dates. The exercise price of the First Option and each Subsequent Option shall be 100% of the fair market value per share of the Company's Common Stock on the date of the grant of the option.
1997 Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan") was adopted by the Board of Directors in February 1997 and approved by the stockholders in March 1997. The Company has reserved a total of 400,000 shares of Common Stock for issuance under the Stock Purchase Plan, plus an annual increase as of the last day of each fiscal year during the term of the Stock Purchase Plan equal to the lesser of (i) the number of shares needed to restore the maximum aggregate number of shares which may be optioned and sold under the Stock Purchase Plan to 400,000 shares, (ii) one percent (1%) of the outstanding shares on such date or (iii) a lesser amount determined by the Board. The Stock Purchase Plan, which is intended to qualify under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), permits eligible employees of the Company to purchase shares of Common Stock through payroll deductions of up to fifteen percent of their compensation, up to a maximum of $25,000 worth of Common Stock (valued at the date of grant) in each calendar year. The Stock Purchase Plan will be implemented by consecutive overlapping 24-month offering periods (each an "Offering Period"). The initial Offering Period will begin on the effective date of this offering and will end on the last trading day in the period ending April 30, 1999. All employees who work at least twenty hours per week and more than five months per calendar year are eligible to participate in the Stock Purchase Plan.
The price of Common Stock purchased under the Stock Purchase Plan will be 85% of the lower of the fair market value of the Common Stock on the first day of each Offering Period or the date of purchase. Employees may withdraw from the Stock Purchase Plan at any time during an Offering Period, and the balance of the payroll deductions will be returned to the employee. Participation in the Stock Purchase Plan ends automatically upon termination of employment with the Company. Rights granted under the Stock Purchase Plan are not transferable by a participant other than by will, the laws of descent and distribution or as otherwise provided under the Stock Purchase Plan.
The Stock Purchase Plan will be administered by the Board of Directors or by a committee appointed by the Board. The Board may amend or modify the Stock Purchase Plan at any time. The Stock Purchase Plan will terminate ten years after the effective date of its adoption, unless sooner terminated by the Board.
401(k) Plan
As of January 1, 1991, the Company adopted a tax-qualified employee savings
and retirement plan (the "401(k) Plan") covering the Company's employees.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 20% of their annual compensation
or the statutorily prescribed annual limit ($9,500 in calendar years 1996 and
1997) and have the amount of such reduction contributed to the 401(k) Plan.
Although the Company does not currently match contributions by employees, the
401(k) Plan allows for matching contributions to be made by the Company in an
amount determined by the Company. The trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in
designated investment options. The 401(k) Plan is intended to qualify under
Section 401 of the Code, so that contributions to the 401(k) Plan, and income
earned on the 401(k) Plan contributions, are not taxable until withdrawn, and
so that the contributions by the Company will be deductible when made.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% SECURITY HOLDERS
Founders' Stock Repurchases. Founders of the Company received an aggregate of 2,182,653 shares of Common Stock upon incorporation of the Company. These shares were subject to the Company's assignable right of repurchase under a Stock Restriction Agreement. During fiscal 1994, the Company amended the Stock Restriction Agreement. In accordance with the amendment, the Company repurchased 165,000 shares of its Common Stock at a price of $0.04 per share, and the Company's right of repurchase with respect to the remaining shares expired. During fiscal 1995, the Company repurchased an additional 88,000 shares of Common Stock from founders at a price of $0.04 per share.
Rambus Partners. Under an agreement signed in March 1990, the Company secured certain patent rights and technology from its founders. The Company committed, under this agreement, to pay to the founders up to a total of 24% of amounts received from any licensing of the patent rights and technology to third parties. Subsequently, the founders assigned their rights to receive payments to Rambus Partners, an entity wholly owned by the founders. In September 1992, the Company acquired Rambus Partners in exchange for 978,260 shares of the Company's Common Stock. In addition the Company assumed option obligations for a total of 146,739 shares of the Company's Common Stock. In September 1992, the Company also entered into agreements to pay certain cash amounts to the founders. The total amounts paid to the founders under these agreements were approximately $244,000 in each of the fiscal years 1994, 1995 and 1996. No amounts were paid during the three months ended December 31, 1996. See Note 9 of Notes to Consolidated Financial Statements.
Series C Financing. On December 23, 1993, in connection with the Company's Series C Preferred Stock financing, the Company sold in the aggregate 1,249,998 shares of Series C Preferred Stock at a price per share of $3.00 to the following investors which are, or which are affiliated with, directors of the Company or entities that own more than 5% of the Company's securities, each of which purchased the aggregate number of shares indicated:
% OF
SHAREHOLDER: SHARES CLASS AGGREGATE
- ------------ ------- ----- ---------
MPAE V Management Co.
(Bruce Dunlevie)....................................... 322,628 25.8% $967,884
WHD/LGM Partners
(William Davidow)...................................... 322,628 25.8% 967,884
Kleiner, Perkins, Caufield & Byers V.................... 322,628 25.8% 967,884
Integral Capital Management, L.P. ...................... 141,057 11.3% 423,171
Dominion Income Management Corp......................... 141,057 11.3% 423,171
|
Series D Financing. On February 24, 1995, in connection with the Company's Series D Preferred Stock financing, the Company sold 1,411,765 shares of Series D Preferred Stock to Goldman, Sachs & Co. at a price per share of $4.25 or an aggregate of $6.0 million. Goldman Sachs currently owns more than 5% of the Company's securities.
Simultaneously with the consummation of this offering, all shares of Preferred Stock will be converted into shares of Common Stock. Holders of Preferred Stock are entitled to certain registration rights with respect to the Common Stock issued or issuable upon conversion thereof. See "Description of Capital Stock--Registration Rights." The Company believes that the shares issued in these transactions were sold at the then fair market value and that the terms of these transactions were no less favorable than the Company could have obtained from unaffiliated third parties.
Loans to Officers. In February 1997, in connection with the exercise of options to purchase shares of the Company's Common Stock by Geoff Tate, David Mooring and Ed Larsen, the Company provided full recourse
loans to such executive officers in the aggregate principal amounts of $160,000, $198,250 and $200,000, respectively. The loans bear interest at an annual rate of 12.0%, are evidenced by promissory notes and are secured by a pledge of an aggregate of 400,000, 114,000 and 40,000 shares, respectively. Principal and all accrued interest on the loans are due in September 1998.
Chromatic Research Inc. In February 1994, the Company licensed its interface technology to Chromatic Research, Inc. ("Chromatic") a multimedia processor design company. Under the terms of the license, Rambus received 626,053 shares of Chromatic Series B Preferred Stock (representing 5% of the then outstanding shares of Chromatic) and continuing royalties. Chromatic was formed in May 1993 (then called Xenon Microsystems Corporation) by, among others, Dr. Farmwald who continues to serve as a director of, and consultant to, Chromatic through the date hereof. Investors in Chromatic include affiliates of Mohr, Davidow Ventures, Merrill, Pickard, Anderson & Eyre and Kleiner, Perkins, Caufield & Byers. In connection with these investments in Chromatic, Dr. Davidow and Mr. Dunlevie joined and continue to sit on the Board of Directors of Chromatic. See Note 13 of Notes to Consolidated Financial Statements.
Purchase of Rambus Series A Preferred Stock from Intel Corporation. In 1990, the Company entered into an agreement with Intel Corporation, under which it issued 562,004 shares of Series A Preferred Stock to Intel. The shares issued were subject to Rambus' assignable right to repurchase the shares, under certain circumstances, at the original price paid by Intel. In fiscal 1995, this right of repurchase was sold by the Company to entities affiliated with Kleiner, Perkins, Caufield & Byers, Mohr, Davidow Ventures, Merrill, Pickard, Andersen & Eyre, Integral Capital Partners and Dominion Income Management Corp. for an aggregate of $936,012. These entities then exercised the right and purchased the Rambus Series A Preferred Stock from Intel.
The Company believes that all related-party transactions described above were on terms no less favorable than could have been otherwise obtained from unrelated third parties. All future transactions between the Company and its executive officers, directors and principal stockholders will be approved by a majority of the independent and disinterested members of the Board of Directors and will be on terms no less favorable than could be obtained from unrelated third parties. In addition, the Board of Directors has voted that any loans or guarantees in the future by the Company for its executive officers, directors or principal stockholders will be approved by a majority of the independent and disinterested members of the Board on the basis that such loans or guarantees will be made only for bona fide business purposes.
1996 TRANSACTIONS WITH INTEL CORPORATION
In November 1996, the Company entered into a new license agreement with Intel Corporation ("Intel") under which Rambus granted to Intel a worldwide, nonexclusive license to manufacture and sell Rambus ICs (the "Intel Contract"). Under the Intel Contract, Intel has agreed to use its reasonable best efforts to design, develop, mass produce, market and sell a commercially attractive PC main memory control chipset which implements certain Rambus interface specifications. Under the Intel Contract, Intel granted to Rambus a worldwide, royalty-free, sublicensable right to certain Intel intellectual property for use in the implementation of the Rambus interface technology.
Under certain circumstances, the Intel Contract imposes an effective limit of 2% on the royalty rate which the Company will receive from sales of RDRAMs by its licensees. Because this effective limit is not triggered with respect to a given licensee unless the licensee is shipping relatively high volumes of RDRAMs, the Company believes that such provision will not have a material adverse effect on its business or financial condition.
The Intel Contract grants to Intel certain rights to make a competing offer if Rambus commences negotiations with any third party to enter into a transaction (i) after which such third party would beneficially own more than 50% of the voting power of Rambus, (ii) in which Rambus would be a party to a merger with such third party and Rambus would not be the surviving corporation or (iii) Rambus would transfer all or substantially all of its business and assets to the third party. The Intel Contract does not require that Rambus
accept any such competing offer from Intel. However, should Rambus complete such a transaction with a third party after receiving from Intel a bona fide offer including money and other consideration at least equal to the money and other consideration included in the third party offer, and on other terms and conditions at least as favorable as those included in the third party offer, then certain of Intel's royalty obligations would cease, the Company would be obligated to refund to Intel certain previously paid royalties, and the license of Rambus technology to Intel under the Intel Contract would become fully paid, irrevocable and would survive any termination of the Intel Contract. This provision of the Intel Contract may significantly discourage future acquisition attempts, even where such acquisitions might be in the best interest of Rambus stockholders. This provision of the Intel Contract will terminate if Intel fails to maintain a specified level of shipments of Rambus compatible ICs after a specified date.
The Intel Contract terminates upon the last to expire of the Rambus patents licensed to Intel. The Intel Contract is subject to early termination (i) by Intel at any time upon written notice to Rambus or (ii) by Rambus upon certain breaches, defaults, or failures by Intel to achieve certain milestones or provide certain support for Rambus technology.
In connection with the Intel Contract, Rambus granted to Intel a warrant for the purchase of up to 1,000,000 shares of Rambus Common Stock at an exercise price of $10.00 per share. Such warrant vests and becomes exercisable by Intel only if more than 20% of the main memory chipsets shipped by Intel in each of two consecutive calendar quarters implement certain Rambus interface specifications, which will result in a charge to the statement of operations at the time achievement of the milestones becomes probable for the excess of the then fair value of the warrant over the exercise price. The warrant expires on January 7, 2005; provided, however, that if the vesting condition described above has not been satisfied by December 31, 2000, then the warrant will expire on December 31, 2000. Rambus granted to Intel certain registration rights with respect to the shares of Common Stock purchasable upon exercise of the warrant.
Intel may designate a representative to observe meetings of the Rambus Board of Directors at such time as 20% of the main memory chipsets shipped by Intel during two consecutive quarters implement certain Rambus interface specifications. Following exercise of the warrant, for so long as Intel continues to hold at least 500,000 shares of the Company's Common Stock, Intel may nominate a representative to the Rambus Board of Directors and the Company must include such nominee among management's nominees to the stockholders and must solicit stockholder votes in favor of such nominee to the same extent that it solicits stockholder votes in favor of management's other nominees. Intel's right to maintain a Board observer or Board member will exist during a calendar quarter only if more than 20% of the main memory chipsets shipped by Intel during each of the two immediately preceding calendar quarters implemented certain Rambus interface specifications. The Rambus Board of Directors may exclude the Intel representative from a Board meeting for certain reasons, including discussion of transactions or potential transactions between the Company and Intel or an affiliate or competitor of Intel, or if in the Board's reasonable good faith judgment, such attendance would be harmful to the Company.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of Common Stock of the Company as of December 31, 1996 and as adjusted to reflect the sale of the shares offered by this Prospectus (assuming no exercise of the Underwriter's over-allotment option), by (i) all persons known to the Company to be the beneficial owners of more than 5% of the Company's Common Stock, (ii) Named Executive Officers, (iii) each of the Company's directors and (iv) all directors and executive officers as a group.
The following table has been prepared in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 and discloses all securities beneficially owned by the named persons as of December 31, 1996, plus all securities which such persons have a right to acquire through the exercise of options or other rights within 60 days of December 31, 1996. Certain individuals in the table below have the right to acquire additional shares after such a 60-day period, as indicated in the footnotes to the table.
PERCENTAGE OF
SHARES BENEFICIALLY
NUMBER OF OWNED(1)
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
NAME OR GROUP OF BENEFICIAL OWNERS OWNED(1) OFFERING OFFERING
---------------------------------- ------------ --------- ---------
MPAE V Management Co.(2)................ 2,491,516 14.3% %
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
WHD/LGM Partners (3).................... 2,491,516 14.3
3000 Sand Hill Road, Building 1 Suite
240
Menlo Park, CA 94025
Kleiner Perkins Caufield & Byers V(4)... 2,391,516 13.8
2750 Sand Hill Road
Menlo Park, CA 94025
Goldman, Sachs & Co.(5)................. 1,411,765 8.1
85 Broad Street, 19th Floor
New York, NY 10004
Integral Capital Management, L.P.(6).... 1,045,599 6.0
2750 Sand Hill Road
Menlo Park, CA 94025
Dominion Income Management Corp. ....... 1,045,598 6.0
15302 25th Drive, S.E.
Mill Creek, WA 98102
Geoff Tate(7)........................... 1,209,789 6.7
Gary Harmon(8).......................... 160,250 0.9
David Mooring(9)........................ 306,500 1.7
Allen Roberts(10)....................... 460,500 2.6
Subodh Toprani(11)...................... 195,500 1.1
William Davidow(12)..................... 2,551,516 14.7
Bruce Dunlevie(13)...................... 2,526,516 14.5
P. Michael Farmwald..................... 1,639,548 9.4
Charles A. Geschke(14).................. 60,000 0.3
Mark Horowitz........................... 968,365 5.6
All directors and executive officers as
a group (11 persons)(15)............... 10,128,484 53.3
|
where applicable. All shares subject to options are currently exercisable and are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the purpose of computing the percentage ownership of any other person.
(2) Represents 2,491,516 shares held of record by Merrill, Pickard, Anderson & Eyre V, L.P. Bruce W. Dunlevie, a director of the Company, is a general manager of MPAE V Management Co. which is a general partner of Merrill, Pickard, Anderson & Eyre V, L.P. and is deemed to have voting and investment power with respect to such shares. See footnote 13 below.
(3) Represents 2,491,516 shares held of record by Mohr, Davidow Ventures II. William Davidow, a director of the Company, is a general partner of WHD/LGM Partners which is a general partner of Mohr, Davidow Ventures II and is deemed to have voting and investment power with respect to such shares. See footnote 12 below.
(4) Represents 2,314,016 shares and 77,500 shares held of record by Kleiner, Perkins, Caufield & Byers V and Kleiner, Perkins, Caufield & Byers Zaibatsu Fund I, respectively.
(5) Represents 1,176,471 shares, 62,292 shares, 60,175 shares, 57,471 shares and 55,356 shares held of record by GS Capital Partners, L.P., Bridge Street Fund 1995, L.P., Bridge Street Fund 1994, L.P., Stone Street Fund 1994, L.P. and Stone Street Fund 1995, L.P., respectively.
(6) Represents 945,251 shares and 100,348 shares held of record by Integral Capital Partners, L.P. and Integral Capital Partners International, C.V., respectively. Integral Capital Management, L.P. is the sole general partner of Integral Capital Partners, L.P. and Integral Capital Partners International, C.V. and is deemed to have voting and investment power with respect to such shares.
(7) Includes 784,289 shares subject to options exercisable within 60 days of December 31, 1996 of which 529,289 shares were vested as of March 1, 1997 and 255,000 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time. Also includes 15,000 shares held of record by Mr. Tate's wife, Colleen Thygesen Tate, as Trustee for their children.
(8) Includes 65,500 shares subject to options exercisable within 60 days of December 31, 1996 of which 25,000 shares were vested as of March 1, 1997 and 40,500 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time. Also includes 2,500 shares held of record by Heather H. Harmon of which Mr. Harmon disclaims beneficial ownership.
(9) Includes 196,500 shares subject to options exercisable within 60 days of December 31, 1996 of which 83,125 shares were vested as of March 1, 1997 and 113,375 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time.
(10) Includes 360,500 shares subject to options exercisable within 60 days of December 31, 1996 of which 229,635 shares were vested as of March 1, 1997 and 130,865 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time.
(11) Includes 80,500 shares subject to options exercisable within 60 days of December 31, 1996 of which no shares were vested as of March 1, 1997 and 80,500 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time. At March 1, 1997, 5,000 shares held by Mr. Toprani were subject to a right of repurchase in favor of the Company which lapses over time.
(12) Includes all shares held by entities affiliated with WHD/LGM Partners. See footnote 3 above. Mr. Davidow, as a general partner of WHD/LGM Partners, is deemed to have voting and investment power with respect to such Shares. Also includes 50,000 shares held of record by The Chachagua Partnership, a California Limited Partnership, of which Mr. Davidow is a partner and is deemed to have voting and investment power with respect to such shares. Also includes 10,000 shares subject to options exercisable within 60 days of December 31, 1996, of which no shares were vested as of March 1, 1997 and 10,000 were unvested and subject to a right of repurchase in favor of the Company which lapses over time.
(13) Includes all shares held by entities affiliated with MPAE V Management Co. See footnote 2 above. Mr. Dunlevie, as a general partner of MPAE V Management Co., may be deemed to beneficially own such shares, but Mr. Dunlevie disclaims beneficial ownership of all such shares except to the extent of his pecuniary interest therein. Also includes 35,000 shares subject to options exerciseable within 60 days of December 31, 1996, of which 25,000 shares were vested as of March 1, 1997 and 10,000 shares were unvested and subject to a right of repurchase in favor of the Company which lapses over time.
(14) Includes 25,000 shares held of record by The Geschke Family Trust Dated 9/25/87, and 35,000 shares subject to options exercisable within 60 days of December 31, 1996 of which 6,250 shares were vested as of March 1, 1997 and 28,750 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time.
(15) Includes 1,248,000 shares subject to options exercisable within 60 days of December 31, 1996 of which 539,010 shares were vested as of March 1, 1997 and 708,990 shares of which were unvested and subject to a right of repurchase in favor of the Company which lapses over time.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001 par value. The Company has designated 40,000 shares of its Preferred Stock as Series E Participating Preferred Stock ("Series E Preferred") for issuance pursuant to the exercise of rights ("Rights") under a rights agreement; currently, no shares of Preferred Stock are outstanding.
The following summary of certain provisions of the Common Stock and Preferred Stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Company's Amended and Restated Certificate of Incorporation which is included as an exhibit to the Registration Statement of which this Prospectus is a part and by the provisions of applicable law.
COMMON STOCK
As of December 31, 1996, there were 17,375,480 shares of Common Stock outstanding that were held of record by approximately 159 stockholders. There will be shares of Common Stock outstanding (based on the number of shares outstanding as of December 31, 1996, and assuming no exercise of the Underwriters' over-allotment option) after giving effect to the sale of Common Stock offered to the public hereby.
The holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding shares of Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available for the payment of dividends. See "Dividend Policy." In the event of a liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of Preferred Stock. Holders of Common Stock have no preemptive rights or rights to convert their Common Stock into any other securities. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and non-assessable, and the shares of Common Stock to be issued upon completion of this offering will be fully paid and non-assessable.
PREFERRED STOCK
Pursuant to the Company's Restated Certificate of Incorporation, the Board of Directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of Preferred Stock (less 40,000 shares which have been designated Series E Preferred Stock pursuant to the stockholder rights agreement) in one or more series and to fix the designations, powers, preferences and privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the Common Stock. The Board of Directors, without stockholder approval, can issue Preferred Stock with voting, conversion or other rights that could adversely affect the voting power and other rights of holders of Common Stock. Preferred Stock could thus be issued quickly with terms calculated to delay, or prevent a change in control of the Company or make removal of management more difficult. Additionally, the issuance of Preferred Stock may have the effect of decreasing the market price of the Common Stock, and may adversely affect the voting and the other rights of the holders of Common Stock. At present, there are no shares of Preferred Stock outstanding and the Company has no plans to issue any of the Preferred Stock, expect as described below.
Series E Preferred purchasable upon exercise of the Rights will not be redeemable. Each share of Series E Preferred will be entitled to an aggregate dividend of 1,000 times the dividend declared per share of Common Stock. In the event of liquidation, the holders of the Series E Preferred will be entitled to 1,000 times the amount paid per share of Common Stock plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment. Each share of Series E Preferred will have 1,000 votes, voting together with the Common Stock. These rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the shares of Series E Preferred, the value of the one one-thousandth interest in a share of Series E Preferred purchasable upon exercise of each Right should approximate the value of one share of Common Stock. See "--Certain Antitakeover Effects--Rights Plan."
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (the "Holders") of approximately 12,000,000 shares of Common Stock issuable upon conversion of Preferred Stock or exercise of a warrant (the "Registrable Securities"), the Holders are entitled to certain rights with respect to the registration of such shares under the Securities Act. If the Company proposes to register any of its securities under the Securities Act, either for its own account or for the account of other security Holders exercising registration rights, such Holders are entitled to notice of such registration and are entitled to include shares of such Common Stock therein. Additionally, Holders of the Registrable Securities are also entitled to certain demand registration rights pursuant to which they may require the Company to file a registration statement under the Securities Act at the Company's expense with respect to their shares of Common Stock, and the Company is required to use its best efforts to effect such registration. Further, the Holders of such Registrable Securities may require the Company to file additional registration statements on Form S-3 at the Company's expense. All of these registration rights are subject to certain conditions and limitations, among them the right of the underwriters of an offering to limit the number of shares included in such registration and the right of the Company not to effect a requested registration within nine months following an offering of the Company's securities, including the offering made hereby.
TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and registrar for the Company's Common Stock. Its telephone number for such purposes is .
CERTAIN ANTITAKEOVER EFFECTS
Certificate of Incorporation and Bylaws
The Company's Amended and Restated Certificate of Incorporation (the "Certificate") provides that the Company's Board of Directors is classified into two classes of directors. See "Management--Classified Board." The Amended and Restated Certificate of Incorporation also provides that, upon the completion of this offering, stockholders can take action only at a duly called annual or special meeting of stockholders. Accordingly, stockholders of the Company will not be able to take action by written consent in lieu of a meeting. This provision may have the effect of deterring hostile takeovers or delaying changes in control or management of the Company.
The Amended and Restated Bylaws of the Company (i) permit only a majority of the Board of Directors to call a special meeting of the stockholders and (ii) require prior notice of matters to be brought before meetings of the stockholders.
Amendment
The Certificate provides that the affirmative vote of the holders of at least two thirds of the shares entitled to vote, voting together as a single class, is required to amend provisions of the Certificate relating to stockholder action without a meeting and the calling of special meetings. The Certificate further provides that the related Bylaws described above (including the stockholder notice procedure) may be amended only by the Company's Board or by the affirmative vote of the holders of at least two thirds of the voting power of the outstanding shares entitled to vote.
These provisions of the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions also may have the effect of preventing changes in the management of the Company. See "Risk Factors--Certain Antitakeover Provisions."
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless: (i) prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding, for purposes of determining the number of shares outstanding, those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two thirds of the outstanding voting stock which is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or consolidation involving the corporation and the interested stockholder; (ii) any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; (iii) subject to certain exceptions, any transaction which results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; or (iv) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.
Limitation of Director and Officer Liability
The Company's Amended and Restated Certificate of Incorporation and Bylaws contain certain provisions relating to the limitation of liability and indemnification of directors and officers. The Company's Amended and Restated Certificate of Incorporation provides that directors of the Company may not be held personally liable to the Company or its stockholders for a breach of fiduciary duty, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the Delaware General Corporation Law, relating to prohibited dividends, distributions and repurchases or redemptions of stock, or (iv) for any transaction from which the director derives an improper benefit. In addition, the Company's Amended and Restated Certificate of Incorporation and Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent authorized by Delaware law.
Rights Plan
On February 28, 1997, pursuant to a Preferred Shares Rights Agreement (the "Rights Agreement") between the Company, and , as Rights Agent (the "Rights Agent"), the Company's Board of Directors declared a dividend of one Right to purchase one one-thousandth share of the Company's Series E Preferred for each outstanding share of Common Stock, $.001 par value ("Common Shares"), of the Company. The dividend is payable on April 1, 1997 (the "Record Date") to stockholders of record as of the close of business on that day. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series E Preferred at an exercise price of $125.00 (the "Purchase Price"), subject to adjustment.
The Rights will not be exercisable until the Distribution Date (defined below). Certificates for the Rights ("Rights Certificates") will not be sent to stockholders and the Rights will attach to and trade only together with the Common Stock. Accordingly, Common Stock certificates outstanding on the Record Date will evidence the Rights related thereto, and Common Stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender or transfer of any certificates for Common Stock outstanding as of the Record Date, even without notation or a copy of the Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate.
The Rights will separate from the Common Stock, Rights Certificates will be issued and the Rights will become exercisable upon the earlier of: (i) 10 days (or such later date as may be determined by a majority of the Board of Directors, excluding directors affiliated with the Acquiring Person, as defined below (the "Continuing Directors")) following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Common Stock; or (ii) 10 business days (or such later date as may be determined by a majority of the Continuing Directors) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding Common Stock. The earlier of such dates is referred to as the "Distribution Date."
As soon as practicable following the Distribution Date, separate Rights Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Rights Certificates alone will evidence the Rights from and after the Distribution Date. The Rights will expire on the earliest of (i) March 21, 2007 (the "Final Expiration Date") or (ii) redemption or exchange of the Rights as described below.
Following the Distribution Date, and until one of the further events described below, holders of the Rights will be entitled to receive, upon exercise and the payment of the Purchase Price, one one-thousandth of a share of the Series E Preferred Stock.
Unless the Rights are earlier redeemed, in the event that an Acquiring Person becomes the beneficial owner of 15% or more of the Company's Common Stock then outstanding, then proper provision will be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person or any affiliate of the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, shares of Common Stock having a value equal to two times the Purchase Price. In the event that the Company does not have sufficient Common Stock available for all Rights to be exercised, or the Board decides that such action is necessary and not contrary to the interests of Rights holders, the Company may instead substitute cash, assets or other securities for the Common Stock for which the Rights would have been exercisable.
Similarly, unless the Rights are earlier redeemed, in the event that, after an Acquiring Person becomes the beneficial owner of 15% or more of the Company's Common Stock then outstanding, (i) the Company is acquired in a merger or other business combination transaction, or (ii) 50% or more of the Company's consolidated assets or earning power are sold (other than in transactions in the ordinary course of business), proper provision must be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person or any affiliate of the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, shares of common stock of the acquiring company having a value equal to two times the Purchase Price.
At any time after the acquisition by an Acquiring Person of beneficial ownership of 15% or more of the Company's outstanding shares of Common Stock and prior to the acquisition by any person or entity of beneficial ownership of 50% or more of the Company's outstanding shares of Common Stock, the Board of Directors of
the Company may exchange the Rights (other than Rights owned by the Acquiring Person), in whole or in part, at an exchange ratio of one Common Share per Right.
At any time on or prior to the close of business on the earlier of (i) the 10th day following the acquisition by an Acquiring Person of beneficial ownership of 15% or more of the Company's Common Stock or such later date as may be determined by a majority of the Continuing Directors and publicly announced by the Company, or (ii) the Final Expiration Date of the Rights, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right.
The Purchase Price payable, the number of Rights, and the number of Series E Preferred or Common Stock or other securities or property issuable upon exercise of the Rights are subject to adjustment from time to time in connection with dilutive issuances by the Company as set forth in the Rights Agreement. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price.
No fractional portion less than integral multiples of one share of Common Stock or one one-thousandth of a share of Series E Preferred will be issued upon exercise of a Right and in lieu thereof, an adjustment in cash will be made based on the market price of the security to be so issued on the last trading date prior to the date of exercise.
Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company (other than any rights resulting from such holder's ownership of Common Stock), including, without limitation, the right to vote or to receive dividends.
The provisions of the Rights Agreement may be supplemented or amended by the Board of Directors in any manner prior to the close of business on the date the Rights separate from the Common Stock and become exercisable. After such date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, defect or inconsistency, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to adjust the time period governing redemption shall be made at such time as the Rights are not redeemable.
Series E Preferred purchasable upon exercise of the Rights will not be redeemable. Each share of Series E Preferred will be entitled to an aggregate dividend of 1,000 times the dividend declared per Common Share. In the event of liquidation, the holders of the Series E Preferred will be entitled to 1,000 times the amount paid per share of Common Stock plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment. Each share of Series E Preferred will have 1,000 votes, voting together with the Common Stock. These rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the shares of Series E Preferred, the value of the one one-thousandth interest in a share of Series E Preferred purchasable upon exercise of each Right should approximate the value of one share of Common Stock.
The Rights approved by the Board are designed to protect and maximize the value of the outstanding equity interests in the Company in the event of an unsolicited attempt by an acquiror to take over the Company, in a manner or on terms not approved by the Board of Directors. Takeover attempts frequently include coercive tactics to deprive the Company's Board of Directors and its stockholders of any real opportunity to determine the destiny of the Company. The Rights have been declared by the Board in order to deter such tactics, including a gradual accumulation of shares in the open market of a 15% or greater position to be followed by a merger or a partial or two-tier tender offer that does not treat all stockholders equally. These tactics unfairly pressure stockholders, squeeze them out of their investment without giving them any real choice and deprive them of the full value of their shares.
The Rights are not intended to prevent a takeover of the Company and will not do so. The Rights may be redeemed by the Company at $0.001 per Right within ten days (or such later date as may be determined by a majority of the Continuing Directors) after the accumulation of 15% or more of the Company's shares by a single acquiror or group. Accordingly, the Rights should not interfere with any merger or business combination approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial strength of the Company or interfere with its business plans. The issuance of the Rights themselves has no dilutive effect, will not affect reported earnings per share, should not be taxable to the Company or to its stockholders and will not change the way in which the Company's shares are presently traded. The Company's Board of Directors believes that the Rights represent a sound and reasonable means of addressing the complex issues of corporate policy created by the current takeover environment.
However, the Rights may have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by the Board of Directors. The Rights may cause substantial dilution to a person or group that attempts to acquire the Company on terms or in a manner not approved by the Company's Board of Directors, except pursuant to an offer conditioned upon the negation, purchase or redemption of the Rights.
Intel Agreement
The Intel Contract grants to Intel certain rights to make a competing offer if Rambus commences negotiations with any third party to enter into a transaction (i) after which such third party would beneficially own more than 50% of the voting power of Rambus, (ii) in which Rambus would be a party to a merger with such third party and Rambus would not be the surviving corporation or (iii) Rambus would transfer all or substantially all of its business and assets to the third party. The Intel Contract does not require that Rambus accept any such competing offer from Intel. However, should Rambus complete such a transaction with a third party after receiving from Intel a bona fide offer including money and other consideration at least equal to the money and other consideration included in the third party offer, and on other terms and conditions at least as favorable as those included in the third party offer, then certain of Intel's royalty obligations would cease, the Company would be obligated to refund to Intel certain previously paid royalties, and the license of Rambus technology to Intel under the Intel Contract would become fully paid, irrevocable and would survive any termination of the Intel Contract. This provision of the Intel Contract may significantly discourage future acquisition attempts, even where such acquisitions might be in the best interest of Rambus stockholders. This provision of the Intel Contract will terminate if Intel fails to maintain a specified level of shipments of Rambus compatible ICs after a specified date. See "Certain Transactions--1996 Transactions with Intel Corporation."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock of the Company. Future sales of substantial amounts of Common Stock in the public market could adversely affect prevailing market prices from time to time. Furthermore, since only a limited number of shares will be available for sale shortly after this offering because of certain contractual and legal restrictions on resale (as described below), sales of substantial amounts of Common Stock of the Company in the public market after the restrictions lapse could adversely affect the prevailing market price and the ability of the Company to raise equity capital in the future.
Upon completion of this offering the Company will have outstanding an aggregate of shares of Common Stock (based upon shares outstanding at December 31, 1996), assuming no exercise of the Underwriters' over-allotment option and no exercise of outstanding options. Of these shares, the shares sold in this offering will be freely tradeable without restriction or further registration under the Securities Act, unless such shares are purchased by "affiliates" of the Company as that term is defined in Rule 144 under the Securities Act (the "Affiliates"). The remaining 17,375,480 shares of Common Stock held by existing stockholders are "restricted securities" as that term is defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act, which rules are summarized below. As a result of the contractual restrictions described below and the provisions of Rules 144, 144(k) and 701, the Restricted Shares will be available for sale in the public market as follows: (i) no shares will be eligible for immediate sale on the date of this Prospectus; and (ii) 17,375,480 shares will be eligible for sale upon expiration of the lock-up agreements 180 days after the date of this Prospectus.
All officers, directors, stockholders and option holders of the Company have agreed not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly (or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of), any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, for a period of 180 days after the date of this Prospectus, without the prior written consent of Morgan Stanley & Co. Incorporated.
In general, under Rule 144 as it will be in effect upon the completion of the offering, beginning 90 days after the date of this Prospectus, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least one year (including the holding period of any prior owner except an Affiliate) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of: (i) one percent of the number of shares of Common Stock then outstanding (which will equal approximately shares immediately after this offering); or (ii) the average weekly trading volume of the Common Stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an Affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years (including the holding period of any prior owner except an Affiliate), is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144; therefore, unless otherwise restricted, "144(k) shares" may therefore be sold immediately upon the completion of this offering. In general, under Rule 701 of the Securities Act as currently in effect, any employee, consultant or advisor of the Company who purchases shares from the Company in connection with a compensatory stock or option plan or other written agreement is eligible to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.
Upon completion of this offering, the holders of 12,296,822 shares of Common Stock issuable upon conversion of Preferred Stock or exercise of a warrant, or their transferees, will be entitled to certain rights with respect to the registration of such shares under the Securities Act. See "Description of Capital Stock--
Registration Rights." Registration of such shares under the Securities Act would result in such shares becoming freely tradeable without restriction under the Securities Act (except for shares purchases by affiliates) immediately upon the effectiveness of such registration.
The Company intends to file a registration statement under the Securities Act covering shares of Common Stock reserved for issuance under the Company's 1997 Plan and 1997 Stock Purchase Plan and shares subject to outstanding options under the 1990 Plan. See "Management--Stock Plans." Such registration statement is expected to be filed and become effective as soon as practicable after the effective date of this offering. Accordingly, shares registered under such registration statement will, subject to Rule 144 volume limitations applicable to Affiliates, be available for sale in the open market, unless such shares are subject to vesting restrictions with the Company or the lock- up agreements described above. As of December 31, 1996, options to purchase 3,302,041 shares of Common Stock were issued and outstanding under the 1990 Plan, and no options to purchase shares had been granted under the Company's 1997 Plan and 1997 Stock Purchase Plan. Subsequent to December 31, 1996 the Board of Directors granted options to purchase an additional 116,500 shares of Common Stock at a weighted average exercise price of $7.73 per share under the 1990 Plan. See "Management--Director Compensation" and "--Stock Plans."
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting Agreement dated the date hereof, the Underwriters named below (the "Underwriters"), for whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist LLC and Robertson, Stephens & Company LLC are serving as Representatives (the "Representatives"), have severally agreed to purchase, and the Company has agreed to sell to them severally the respective number of shares of Common Stock set forth opposite their respective names below:
NUMBER OF
NAME SHARES
---- ---------
Morgan Stanley & Co. Incorporated..................................
Hambrecht & Quist LLC..............................................
Robertson, Stephens & Company LLC..................................
---
Total............................................................
===
|
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares of Common Stock offered hereby are subject to the approval of certain legal matters by counsel and to certain other conditions. The Underwriters are obligated to take and pay for all of the shares of Common Stock offered hereby (other than those covered by the over-allotment option described below) if any are taken.
The Underwriters initially propose to offer part of the shares of Common Stock offered hereby directly to the public at the initial public offering price set forth on the cover page hereof and part to certain dealers at a price which represents a concession not in excess of $ per share under the initial public offering price. The Underwriters may allow, and such dealers may re-allow, a concession not in excess of $ per share to other Underwriters or to certain other dealers.
Pursuant to the Underwriting Agreement, the Company has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to an additional shares of Common Stock at the initial public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The Underwriters may exercise such option to purchase solely for the purpose of covering over-allotments, if any, incurred in the sale of the shares of Common Stock offered hereby. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number set forth next to such Underwriter's name in the preceding table bears to the total number of shares of Common Stock offered hereby.
The Representatives have informed the Company that the Underwriters do not intend to confirm sales in excess of five percent of the number of shares of Common Stock offered hereby to accounts over which they exercise discretionary authority.
The Company and the Underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
See "Shares Eligible for Future Sale" for a description of certain arrangements by which all officers, directors, stockholders and option holders of the Company have agreed not to sell or otherwise dispose of Common Stock or convertible securities of the Company for up to 180 days after the date of this Prospectus without the prior consent of Morgan Stanley & Co. Incorporated. The Company has agreed in the Underwriting Agreement that it will not, directly or indirectly, without the prior written consent of Morgan Stanley & Co. Incorporated, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exchangeable for Common Stock, for a period of 180 days after the date of this Prospectus, except under certain circumstances.
In order to facilitate the offering of the Common Stock, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may over-allot in connection with the offering, creating a short position in the Common Stock for their own account. In addition, to cover over-allotments or to stabilize the price of the Common Stock, the Underwriters may bid for, and purchase, shares of Common Stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the Common Stock in the offering, if the syndicate repurchases previously distributed Common Stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the Common Stock above independent market levels. The Underwriters are not required to engage in these activities, and may end any of these activities at any time.
Morgan Stanley Group Inc., which is associated with Morgan Stanley & Co. Inc., is a limited partner of the general partner of Integral Capital Partners, L.P. and Integral Capital Partners, C.V., which in the aggregate will own 1,045,599 shares, or % of the outstanding capital stock of the Company, upon the closing of the offering. Morgan Stanley & Co. Inc. disclaims beneficial ownership of the shares held by Integral Capital Partners, L.P. and Integral Capital Partners, C.V., except to the extent of any pecuniary interest therein.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common Stock of the Company. The initial public offering price will be determined by negotiations between the Company and the Representatives. Among the factors considered in determining the initial public offering price will be the future prospects of the Company and its industry in general, sales, earnings and certain other financial and operating information of the Company in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those of the Company. The estimated initial public offering price range set forth on the cover page of this Preliminary Prospectus is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304. Certain legal matters in connection with the offering will be passed upon for the Underwriters by Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306.
EXPERTS
The consolidated financial statements and schedule of the Company at September 30, 1995 and 1996 and for each of the three years in the period ended September 30, 1996 appearing in this Prospectus and Registration Statement have been audited by Coopers & Lybrand L.L.P., independent auditors, as set forth in their report thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Certain items are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the Common Stock offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed therewith. Statements contained in this Prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A copy of the Registration Statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048, and copies of all or any part of the Registration Statement may be obtained from such offices upon the payment of the fees prescribed by the Commission. The Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the site is http://www.sec.gov.
RAMBUS INC.
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Deficit........................... F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
|
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders Rambus Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Rambus Inc. and Subsidiary as of September 30, 1995 and 1996, and the related consolidated statements of operations, stockholders' deficit and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rambus Inc. and Subsidiary as of September 30, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1996 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
San Jose, California
November 1, 1996, except for Note 17
for which the date is
February 28, 1997.
To the Board of Directors and Stockholders Rambus Inc. and Subsidiary
The financial statements included herein have been adjusted to give effect to the reincorporation of the Company in Delaware as described more fully in Note 17 to the financial statements. The above report is in the form that will be signed by Coopers & Lybrand L.L.P. upon the effectiveness of such reincorporation assuming that from March 6, 1997 to the effective date of such reincorporation, no other events shall have occurred that would affect the accompanying financial statements or notes thereto.
Coopers & Lybrand L.L.P.
San Jose, California
March 6, 1997
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
PRO FORMA
SEPTEMBER 30, (NOTE 16)
------------------ DECEMBER 31, DECEMBER 31,
1995 1996 1996 1996
-------- -------- ------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents...... $ 977 $ 742 $ 2,108
Marketable securities.......... 13,173 7,812 8,820
Accounts receivable............ 1,206 718 2,919
Prepaids and other current
assets........................ 840 873 871
-------- -------- --------
Total current assets......... 16,196 10,145 14,718
Property and equipment, net...... 1,598 2,340 2,544
Investment....................... -- -- 1,200
Other assets..................... 513 383 241
-------- -------- --------
Total assets................. $ 18,307 $ 12,868 $ 18,703
======== ======== ========
LIABILITIES
Current liabilities:
Accounts and taxes payable,
accrued payroll and other
liabilities................... $ 1,113 $ 1,237 $ 1,759
Current portion of:
Loan.......................... -- -- 132
Capital lease obligations..... 929 753 695
Deferred revenue.............. 9,721 13,082 14,304
-------- -------- --------
Total current liabilities.... 11,763 15,072 16,890
Loan, less current portion....... -- -- 662
Capital lease obligations, less
current portion................. 687 544 443
Deferred revenue, less current
portion......................... 13,793 9,396 12,365
-------- -------- --------
Total liabilities............ 26,243 25,012 30,360
-------- -------- --------
Commitments (Note 9)
STOCKHOLDERS' DEFICIT
Convertible preferred stock,
$.001 par value:
Authorized: 11,336,096 shares;
Issued and outstanding:
11,296,822 shares at September
30, 1995 and 1996 and December
31, 1996 and no shares pro
forma......................... 11 11 11
(Liquidation value: $19,894 at
September 30, 1995 and 1996
and December 31, 1996 and none
pro forma)
Common stock, $.001 par value:
Authorized: 22,500,000 shares;
Issued and outstanding:
5,561,082 shares at September
30, 1995, 5,758,749 shares at
September 30, 1996, 6,078,658
shares at December 31, 1996
and 17,375,480 shares pro
forma......................... 6 6 6 $ 17
Additional paid-in capital....... 22,095 22,330 22,744 22,744
Accumulated deficit.............. (30,077) (34,492) (34,400) (34,400)
Cumulative translation
adjustment...................... 29 1 (18) (18)
-------- -------- -------- --------
Total stockholders' deficit.. (7,936) (12,144) (11,657) $(11,657)
-------- -------- -------- ========
Total liabilities and
stockholders' deficit..... $ 18,307 $ 12,868 $ 18,703
======== ======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------- --------------------
1994 1995 1996 1995 1996
-------- -------- -------- --------- ---------
(UNAUDITED)
Contract revenues......... $ 5,000 $ 7,364 $ 11,205 $ 2,510 $ 4,066
Royalties................. 65 1,425
-------- -------- -------- --------- ---------
Total revenues........ 5,000 7,364 11,270 2,510 5,491
-------- -------- -------- --------- ---------
Costs and expenses:
Cost of contract
revenues............... 3,844 5,236 4,821 1,115 1,037
Research and
development............ 3,067 3,117 5,218 1,142 2,263
Sales and marketing..... 2,569 3,376 4,052 955 1,485
General and
administrative......... 1,717 1,688 1,747 454 603
-------- -------- -------- --------- ---------
11,197 13,417 15,838 3,666 5,388
-------- -------- -------- --------- ---------
Operating income
(loss)............... (6,197) (6,053) (4,568) (1,156) 103
Interest and other income,
net...................... 215 619 737 193 109
Interest expense.......... (296) (297) (298) (81) (64)
-------- -------- -------- --------- ---------
Income (loss) before
income taxes......... (6,278) (5,731) (4,129) (1,044) 148
Provision for income
taxes.................... 351 1,289 286 82 56
-------- -------- -------- --------- ---------
Net income (loss)..... $ (6,629) $ (7,020) $ (4,415) $ (1,126) $ 92
======== ======== ======== ========= =========
Pro forma net income
(loss) per share......... $ (0.25) $ 0.01
======== =========
Pro forma number of shares
used in per share
calculations............. 17,432 20,018
======== =========
|
The accompanying notes are an integral part of these consolidated financial statements.
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS)
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE
----------------- -------------- PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
--------- ------- ------ ------ ---------- ----------- ----------- --------
Balances, September 30,
1993................... 7,697 $ 8 4,067 $ 4 $ 8,049 $(16,427) $ 15 $ (8,351)
Issuance of common
stock upon exercise of
options............... -- -- 1,248 1 226 -- -- 227
Repurchase of common
stock for cash........ -- -- (165) -- (6) -- -- (6)
Issuance of Series B
preferred stock....... 467 -- -- -- 999 -- -- 999
Issuance of Series C
preferred stock, net
of issuance costs of
$7.................... 1,250 1 -- -- 3,742 -- -- 3,743
Foreign currency
translation
adjustments........... -- -- -- -- -- -- 12 12
Net loss............... -- -- -- -- -- (6,630) -- (6,630)
--------- ------ ----- --- ------- -------- ---- --------
Balances, September 30,
1994................... 9,414 9 5,150 5 13,010 (23,057) 27 (10,006)
Issuance of common
stock upon exercise of
options............... -- -- 499 1 189 -- -- 190
Issuance of Series D
preferred stock, net
of issuance costs of
$35................... 1,883 2 -- -- 7,963 -- -- 7,965
Repurchase of common
stock for cash........ -- -- (88) -- (3) -- -- (3)
Sale of Series A
preferred stock
purchase rights....... -- -- -- -- 936 -- -- 936
Foreign currency
translation
adjustments........... -- -- -- -- -- -- 2 2
Net loss............... -- -- -- -- -- (7,020) -- (7,020)
--------- ------ ----- --- ------- -------- ---- --------
Balances, September 30,
1995................... 11,297 11 5,561 6 22,095 (30,077) 29 (7,936)
Issuance of common
stock upon exercise of
options............... -- -- 212 -- 239 -- -- 239
Repurchase of common
stock for cash........ -- -- (14) -- (4) -- -- (4)
Foreign currency
translation
adjustments........... -- -- -- -- -- -- (28) (28)
Net loss............... -- -- -- -- -- (4,415) -- (4,415)
--------- ------ ----- --- ------- -------- ---- --------
Balances, September 30,
1996................... 11,297 11 5,759 6 22,330 (34,492) 1 (12,144)
Issuance of common
stock upon exercise of
options............... -- -- 320 -- 414 -- -- 414
Foreign currency
translation
adjustments........... -- -- -- -- -- -- (19) (19)
Net income............. -- -- -- -- -- 92 -- 92
--------- ------ ----- --- ------- -------- ---- --------
Balances, December 31,
1996 (unaudited)....... 11,297 $ 11 6,079 $ 6 $22,744 $(34,400) $(18) $(11,657)
========= ====== ===== === ======= ======== ==== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------- --------------------
1994 1995 1996 1995 1996
-------- -------- -------- --------- ---------
(UNAUDITED)
Cash flows from operating
activities:
Net income (loss)......... $ (6,629) $ (7,020) $ (4,415) $ (1,126) $ 92
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating activities:
Depreciation and
amortization........... 1,670 1,552 1,194 276 326
Other................... (37) 36 82 22 20
Change in operating
assets and liabilities:
Accounts receivable... 895 (1,096) 488 961 (2,201)
Other current assets.. 409 (226) (33) 43 2
Other assets.......... 225 191 130 56 141
Accounts and taxes
payable, accrued
payroll and other
liabilities.......... (325) (243) 54 147 503
Deferred revenue...... 1,990 8,096 (1,036) (1,415) 2,989
-------- -------- -------- --------- ---------
Net cash provided by
(used in) operating
activities......... (1,802) 1,290 (3,536) (1,036) 1,872
-------- -------- -------- --------- ---------
Cash flows from investing
activities:
Purchase of property and
equipment................ (450) (1,227) (1,952) (224) (530)
Proceeds from sale of
property and equipment... 350 516 467 59
Purchases of marketable
securities............... (12,501) (27,611) (20,050) (4,387) (6,369)
Maturities of marketable
securities............... 9,000 17,939 25,410 4,884 5,362
-------- -------- -------- --------- ---------
Net cash provided by
(used in) investing
activities......... (3,601) (10,383) 3,875 332 (1,537)
-------- -------- -------- --------- ---------
Cash flows from financing
activities:
Issuance of Series B
preferred stock.......... 1,000 -- -- -- --
Issuance of Series C
preferred stock.......... 3,743 -- -- -- --
Issuance of Series D
preferred stock.......... -- 7,965 -- -- --
Sale of convertible
preferred stock purchase
rights................... -- 936 -- -- --
Issuance of common stock.. 227 189 239 88 414
Repurchase of common
stock.................... (6) (3) (4) -- --
Proceeds from bank loans.. -- -- -- -- 794
Principal payments on
capital lease
obligations.............. (486) (565) (781) (142) (158)
-------- -------- -------- --------- ---------
Net cash provided by
(used in) financing
activities......... 4,478 8,522 (546) (54) 1,050
-------- -------- -------- --------- ---------
Foreign currency translation
adjustment................. 12 2 (28) (7) (19)
-------- -------- -------- --------- ---------
Net decrease in cash and
cash equivalents........... (913) (569) (235) (765) 1,366
Cash and cash equivalents at
beginning of period........ 2,459 1,546 977 977 742
-------- -------- -------- --------- ---------
Cash and cash equivalents at
end of period.............. $ 1,546 $ 977 $ 742 $ 212 $ 2,108
======== ======== ======== ========= =========
|
The accompanying notes are an integral part of these consolidated financial statements.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS OF THE COMPANY:
Rambus Inc. and Subsidiary (the Company) designs, develops, licenses and markets high-speed chip-to-chip interface technology to enhance the performance and cost-effectiveness of consumer electronics, computer systems and other electronic systems. The Company licenses semiconductor companies to manufacture and sell memory and logic ICs incorporating Rambus interface technology and markets its solution to systems vendors to encourage them to design Rambus interface technology into their products. The Company's technology cost-effectively increases the data transfer rate, or memory bandwidth, allowing semiconductor memory devices to keep pace with faster generations of processors and controllers and thus supports the accelerating data transfer requirements of multimedia and other high-bandwidth applications.
The Company was incorporated on March 9, 1990 in California. In February 1997, the Company's Board of Directors approved the reincorporation of the Company in Delaware. Note 17 sets out the details of the reincorporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Financial Statement Presentation:
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Rambus K.K., located in Tokyo, Japan. All intercompany accounts and transactions have been eliminated in the accompanying consolidated financial statements. Identifiable assets and revenues of the subsidiary are not significant.
Certain reclassifications have been made to the fiscal 1994 financial statement amounts to conform to the fiscal 1995 and 1996 presentation. The reclassifications have no effect on previously reported net loss, stockholders' deficit, total assets or total liabilities.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition:
The Company has entered into nonexclusive technology agreements with semiconductor licensees. Generally, these agreements provide a license to use the Company's proprietary technology and to receive engineering implementation services, customer support, and enhancements in exchange for milestone payments during integration of the technology as well as royalties based on product sales.
The contract fees for the services provided under these agreements are comprised of license fees, engineering service fees and nonrefundable, prepaid royalties. The contract fees are bundled together as the Company generally does not provide or price these services separately. Accordingly, the revenues from such contract fees are recognized ratably over the period during which the post-contract customer support is expected to be provided.
The Company recognizes royalties upon notification of sale by its licensees.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
Research and Development:
Costs incurred in research and development are expensed as incurred.
Income Taxes:
The Company accounts for income taxes under the liability method whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current laws and rates in effect. Research and development credits are accounted for using the flow-through method.
Computation of Historical Net Income (Loss) Per Share and Pro Forma Net Income (Loss) Per Share:
Historical net income (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of the incremental common shares issuable upon conversion of convertible preferred stock (using the "if converted" method) and stock options and warrants (using the treasury stock method) as if converted for all periods.
The Company has computed common and common equivalent shares in determining the number of shares used in calculating net income (loss) per share for all periods presented pursuant to the Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 83. SAB 83 requires the Company to include all common shares and all common share equivalents issued during the 12 month period preceding the filing date of an initial public offering in its calculation of the number of shares used to determine net income (loss) per share as if the shares had been outstanding for all periods presented.
Pro forma net income (loss) per share for the year ended September 30, 1996 and the three months ended December 31, 1996 assumes the common shares issuable upon conversion of the outstanding convertible preferred stock have been outstanding during such periods.
Historical net income (loss) per share is as follows (in thousands, except per share data):
(UNAUDITED)
THREE MONTHS
YEAR ENDED SEPTEMBER ENDED
30, DECEMBER 31,
------------------------- ---------------
1994 1995 1996 1995 1996
------- ------- ------- ------- ------
Net income (loss)............... $(6,629) $(7,020) $(4,415) $(1,126) $ 92
======= ======= ======= ======= ======
Net income (loss) per share..... $ (1.28) $ (1.23) $ (0.72) $ (0.19) $ 0.01
======= ======= ======= ======= ======
Number of shares used in per
share calculation.............. 5,172 5,713 6,135 6,045 20,018
======= ======= ======= ======= ======
|
Cash and Cash Equivalents:
Cash equivalents are highly liquid investments with original or remaining maturities of three months or less at the date of purchase. Cash equivalents present risk of changes in value because of interest rate changes. The Company maintains its cash balances with high quality financial institutions and has not experienced any material losses relating to any investment instruments.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
Marketable Securities:
Available-for-sale securities are carried at fair value, based on quoted market prices, with the unrealized gains or losses, net of tax, reported in stockholders' deficit. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, both of which are included in interest income. Realized gains and losses are recorded on the specific identification method.
Fair Value of Financial Instruments:
The amounts reported for cash equivalents, receivables and other financial instruments are considered to approximate fair values based upon comparable market information available at the respective balance sheet dates.
Property and Equipment:
Property and equipment are stated at cost and depreciated on a straight-line basis over estimated useful lives of three to five years. Leasehold improvements and property under capital leases are amortized on a straight- line basis over the shorter of their estimated useful lives or the terms of the leases. Upon disposal, assets and related accumulated depreciation are removed from the accounts and the related gain or loss is included in results from operations.
Foreign Currency Translation:
The functional currency for the Company's foreign operation in Japan is the Japanese yen. The translation from the Japanese yen to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted average exchange rate during the period. Adjustments resulting from such translation are reflected as a separate component of stockholders' deficit. Gains or losses resulting from foreign currency transactions are included in the results of operations.
Unaudited Interim Financial Information:
The accompanying interim consolidated balance sheet as of December 31, 1996 and the consolidated statements of operations and cash flows for the three months ended December 31, 1995 and 1996 together with the related notes are unaudited but include all adjustments, consisting of only normal recurring adjustments, which the Company considers necessary to present fairly, in all material aspects, the consolidated financial position, the results of operations and cash flows for the period ended December 31, 1995 and 1996. Results for the three months ended December 31, 1995 and 1996 are not necessarily indicative of results for an entire year.
New Pronouncements:
During March 1995, the Financial Accounting Standards Board issued Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires the Company to review the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 will become effective for the Company's 1997 fiscal year. The Company does not expect SFAS 121 to have a material impact on the Company's financial condition or results of operations.
Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based Compensation," encourages, but does not require, companies to record compensation cost for stock-based compensation plans at fair value. The Company has chosen to continue to account for employee stock options
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
using the intrinsic value method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company will provide pro forma disclosures for the effect of this statement for the 1997 fiscal year.
3. BUSINESS RISKS AND CREDIT CONCENTRATION:
The Company operates in the intensely competitive semiconductor industry which has been characterized by price erosion, rapid technological change, short product life cycles, cyclical market patterns and heightened foreign and domestic competition. Significant technological changes in the industry could affect operating results adversely.
The Company markets and sells its technology to a narrow base of customers and generally does not require collateral. At December 31, 1996, three customers accounted for 52%, 25% and 17% of accounts receivable, respectively. At September 30, 1996, three customers accounted for 59%, 21% and 17% of accounts receivable. At September 30, 1995, three customers accounted for 42%, 41% and 17% of accounts receivable.
As of December 31, 1995 and 1996, the Company's cash and cash equivalents are deposited with principally one financial institution in the form of demand deposits and money market accounts.
Financial instruments that potentially subject the Company to concentrations of credit risk comprise principally cash and cash equivalents, available-for- sale securities and trade accounts receivable. The Company invests its excess cash primarily in commercial paper, U.S. government agency and treasury notes that mature within one year.
4. MARKETABLE SECURITIES:
All marketable securities are classified as available-for-sale and are summarized as follows (in thousands):
SEPTEMBER 30,
-------------- DECEMBER 31,
1995 1996 1996
------- ------ ------------
(UNAUDITED)
United States government debt securities..... $ 4,344 $2,442 $1,473
U.S. treasury bills.......................... 3,366 -- --
Corporate debt securities.................... 5,463 5,370 7,347
------- ------ ------
$13,173 $7,812 $8,820
======= ====== ======
|
All marketable debt securities classified as current have scheduled maturities of less than one year. The cost of marketable securities approximates the fair value of the securities.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY AND EQUIPMENT:
Property and equipment, net is comprised of the following (in thousands):
SEPTEMBER 30,
---------------- DECEMBER 31,
1995 1996 1996
------- ------- ------------
(UNAUDITED)
Computer equipment........................ $ 2,962 $ 3,684 $ 4,088
Computer software......................... 1,977 2,771 2,894
Furniture and fixtures.................... 546 818 821
Leasehold improvements.................... 170 272 272
------- ------- -------
5,655 7,545 8,075
Less accumulated depreciation and
amortization............................. (4,057) (5,205) (5,531)
------- ------- -------
$ 1,598 $ 2,340 $ 2,544
======= ======= =======
|
Depreciation and amortization expense was approximately $1,295,000, $1,288,000, $1,148,000, $250,000 and $326,000 in the years ended September 30, 1994, 1995 and 1996 and the three months ended December 31, 1995 and 1996, respectively.
Property and equipment acquired under capital leases included above is comprised of (in thousands):
SEPTEMBER 30,
---------------- DECEMBER 31,
1995 1996 1996
------- ------- ------------
(UNAUDITED)
Computer equipment.......................... $ 2,514 $ 2,302 $ 2,302
Furniture and fixtures...................... 460 403 403
------- ------- -------
2,974 2,705 2,705
Less accumulated amortization............... (2,164) (1,989) (2,108)
------- ------- -------
$ 810 $ 716 $ 597
======= ======= =======
|
6. INVESTMENT:
In December 1996, the Company licensed technology to Monolithic System Technology, Inc. (MoSys) in exchange for a cash payment of $50,000 and 184,617 shares of MoSys common stock valued at $1,200,000. These shares represented a 1% equity interest in MoSys at the time of issuance.
7. ACCOUNTS AND TAXES PAYABLE, ACCRUED PAYROLL AND OTHER LIABILITIES:
Accounts and taxes payable, accrued payroll and other liabilities consist of the following (in thousands):
SEPTEMBER 30,
------------- DECEMBER 31,
1995 1996 1996
------ ------ ------------
(UNAUDITED)
Accounts payable................................ $ 110 $ 228 $ 480
Taxes payable................................... 82 84 138
Accrued payroll and related accruals............ 231 338 609
Other liabilities............................... 690 587 532
------ ------ ------
$1,113 $1,237 $1,759
====== ====== ======
|
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL LEASE OBLIGATIONS:
The Company has leased equipment under capital lease obligations maturing through fiscal year 1999. The lease agreements require the Company to maintain liability and property insurance.
At September 30, 1996, future minimum annual payments due under the capital lease obligations are as follows (in thousands):
FISCAL YEAR:
------------
1997............................................................ $ 913
1998............................................................ 458
1999............................................................ 153
------
Minimum lease payments.......................................... 1,524
Less amount representing interest............................... (227)
------
Total minimum payments.......................................... 1,297
Less amount due in one year..................................... (753)
------
Long term amount due after one year............................. $ 544
======
|
9. LEASE COMMITMENTS AND COMMITMENTS TO THE COMPANY'S FOUNDERS:
The Company leases its office facilities under an operating lease agreement that expires February 28, 2005. Under the terms of this lease, the Company is also responsible for taxes, insurance and utilities. As of September 30, 1996, aggregate future minimum payments under this lease are (in thousands):
FISCAL YEAR:
------------
1997............................................................ $ 645
1998............................................................ 660
1999............................................................ 682
2000............................................................ 698
2001............................................................ 720
Thereafter...................................................... 2,589
------
Total minimum lease payments.................................... $5,994
======
|
Rent expense was approximately $320,000, $581,000, $736,000, $185,000 and $188,000 for the years ended September 30, 1994, 1995 and 1996 and for the three months ended December 31, 1995 and 1996, respectively.
Rambus Partners
Under an agreement signed in March 1990, the Company secured certain patent rights and technology from its founders. The Company committed, under this agreement, to pay to the founders up to a total of 24% of amounts received from any licensing of the patent rights and technology to third parties. Subsequently, the founders assigned their rights to receive payments to Rambus Partners, an entity wholly owned by the founders. In September 1992, the Company acquired Rambus Partners in exchange for 978,260 shares of the Company's common stock. In addition the Company assumed option obligations for a total of 146,739 shares of the Company's common stock.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASE COMMITMENTS AND COMMITMENTS TO THE COMPANY'S FOUNDERS--(CONTINUED):
In September 1992, the Company also entered into agreements to pay certain cash amounts to the founders. The total amounts paid to the founders under these agreements were approximately $244,000 in each of the fiscal years 1994, 1995 and 1996. No amounts were paid during the three months ended December 31, 1996. Included in the accompanying balance sheets under the caption other current liabilities are amounts payable to the founders of approximately $244,000 at September 30, 1995, September 30, 1996 and December 31, 1996, respectively. The associated deferred amounts to the founders totaling $679,000, $456,000 and $400,000 at September 30, 1995 and 1996 and December 31, 1996, respectively, include $223,000 classified in other current assets for each period with the remaining balance classified in other assets.
10. STOCKHOLDERS' DEFICIT:
Convertible Preferred Stock:
Holders of Series A, B, C and D preferred stock are entitled to preferential noncumulative dividends generally at a rate not to exceed $.032, $.1712, $.24 and $.34 per share, respectively, if and when declared by the Board of Directors. No dividends have been declared as of September 30, 1996. The holders of Series A, B, C and D shares have liquidation preferences of $.40, $2.14, $3.00 and $4.25 per share, respectively, plus an amount equal to all declared but unpaid dividends. Preferred stockholders are entitled to one vote for each share of common stock into which the preferred stock is convertible. Additionally, preferred stockholders are entitled to elect two directors.
At the option of the holder, each share of preferred stock is convertible on a one-for-one basis (subject to certain adjustments) into common stock. The shares will automatically convert into common stock concurrent with the closing of an underwritten public offering of common stock under the Securities Act of 1933, as amended, with minimum proceeds of $7,500,000 and a minimum price per share of $4.25 (subject to certain adjustments).
In 1990, the Company entered into an agreement with Intel Corporation, under which it issued shares of Series A Preferred Stock to Intel. The shares issued were subject to Rambus' assignable right to repurchase the shares, under certain circumstances, at the original price paid by Intel. In 1995, this right of repurchase was sold by the Company to entities affiliated with Kleiner, Perkins, Caufield & Byers, Mohr, Davidow Ventures, Merrill, Pickard, Anderson & Eyre, Integral Capital Partners and Dominion Income Management Corp. for an aggregate of $936,012. These entities then exercised the right and purchased the Rambus Series A Preferred Stock from Intel. The proceeds to the Company are included in additional paid-in capital in the accompanying balance sheet.
At September 30, 1996, convertible preferred stock consists of the following (in thousands):
COMMON
STOCK
SHARES RESERVED
SHARES ISSUED AND PROCEEDS FOR LIQUIDATION
SERIES AUTHORIZED OUTSTANDING (NET) CONVERSION VALUE
------ ---------- ----------- -------- ---------- -----------
A.................. 5,400 5,361 $ 3,678 5,361 $ 2,144
B ................. 2,804 2,804 5,977 2,804 6,000
C ................. 1,250 1,250 3,743 1,250 3,750
D.................. 1,882 1,882 7,965 1,882 8,000
------ ------ ------- ------ -------
11,336 11,297 $21,363 11,297 $19,894
====== ====== ======= ====== =======
|
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCKHOLDERS' DEFICIT--(CONTINUED):
Common Stock:
Founders of the Company received an aggregate of 2,182,653 shares of common stock upon incorporation of the Company in exchange for the assignment of patent rights and technology. These shares were subject to the Company's right of repurchase under a Stock Restriction Agreement. During fiscal 1994, the Company amended the Stock Restriction Agreement. In accordance with the amendment, the Company repurchased 165,000 shares of its common stock at $.04 per share and the Company's right of repurchase with respect to the remaining shares expired. During fiscal 1995, the Company repurchased an additional 88,000 shares of common stock from founders at a price of $.04 per share.
As of September 30, 1996, a total of 261,283 common shares held by employees were subject to repurchase.
In September 1996, the Company's Board of Directors, subject to stockholder approval, increased the number of authorized shares of common stock to 22,500,000.
Stock Option Plan:
In March 1990, the Company adopted the 1990 Stock Option Plan under which 2,657,143 shares of common stock were reserved for issuance. Incentive stock options may be granted with exercise prices of no less than fair market value, and nonqualified stock options may be granted with exercise prices of no less than 85% of the fair market value of the common stock on the grant date, as determined by the Board of Directors. Grants to employees of the Company who are also directors of the Company may not exceed 800,000 shares of common stock. The options generally vest over a four-year period but may be exercised immediately subject to repurchase by the Company for those options that are not vested. Vesting periods are determined by the Board of Directors at the date of grant.
During 1992 and 1994, the 1990 Stock Option Plan was amended to authorize the granting of options which shall vest within one year from the date that certain options previously granted to the optionee (as defined in the Plan) have vested in full. Pursuant to requirements imposed by the California Department of Corporations, these options may be granted only to those employees whose annual compensation exceeds $60,000 per year. The total number of shares reserved for these options is 950,000.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCKHOLDERS' DEFICIT--(CONTINUED):
At September 30, 1996 and December 31, 1996, the total number of shares reserved for the 1990 Stock Option Plan, excluding those previously exercised under the Plan, is 4,170,902 and 3,850,993, respectively.
A summary of options granted under the plan is as follows:
OPTIONS OUTSTANDING
SHARES -----------------------
AVAILABLE NUMBER OF PRICE
FOR GRANT SHARES PER SHARE
---------- ---------- -----------
Outstanding at September 30, 1993......... 665,807 2,606,689 $ .04-$ .25
Shares reserved........................... 967,857 -- --
Options granted........................... (1,063,700) 1,063,700 $ .25-$1.00
Options canceled.......................... 64,637 (64,637) $.25
Options exercised......................... -- (1,247,995) $ .04-$ .40
---------- ----------
Outstanding at September 30, 1994......... 634,601 2,357,757 $ .04-$1.00
Shares reserved........................... 875,000 -- --
Options granted........................... (1,204,900) 1,204,900 $1.00-$3.00
Options canceled.......................... 37,513 (37,513) $ .25-$1.00
Options exercised......................... -- (498,789) $ .13-$1.00
---------- ----------
Outstanding at September 30, 1995......... 342,214 3,026,355 $ .04-$3.00
Shares reserved........................... 1,000,000 -- --
Options granted........................... (347,500) 347,500 $3.00-$5.00
Options canceled.......................... 70,738 (70,738) $ .25-$3.00
Options exercised......................... -- (197,667) $ .04-$4.00
---------- ----------
Outstanding at September 30, 1996......... 1,065,452 3,105,450 $ .04-$5.00
Options granted........................... (516,500) 516,500 $5.00-$7.00
Options exercised......................... -- (319,909) $ .04-$5.00
---------- ----------
Outstanding at December 31, 1996
(unaudited).............................. 548,952 3,302,041 $ .04-$7.00
========== ==========
|
At September 30, 1996 and December 31, 1996, options for the purchase of 1,385,519 and 1,287,087 shares, respectively, were exercisable without repurchase from the Company.
11. EMPLOYEE BENEFIT PLANS:
The Company has a 401(k) Profit Sharing Plan (the "Plan") qualified under
Section 401(k) of the Internal Revenue Code of 1986. Each eligible employee
may elect to contribute up to 20% of the employee's annual compensation to the
Plan. The Company, at the discretion of its Board of Directors, may match
employee contributions to the Plan but has not done so for the years ended
September 30, 1994, 1995 and 1996.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES:
The provision for income taxes comprises (in thousands):
YEAR ENDED SEPTEMBER 30,
--------------------------
1994 1995 1996
----------------- --------
Foreign withholding tax:
Current........................................ $ 350 $ 1,235 $ 270
Federal:
Current........................................ -- 40 --
State:
Current........................................ 1 14 16
------- --------- -------
$ 351 $ 1,289 $ 286
======= ========= =======
|
The Company's effective tax rate on pretax income differs from the U.S. federal statutory regular tax rate as follows:
YEAR ENDED SEPTEMBER 30,
------------------------------
1994 1995 1996
-------- -------- --------
Benefit at U.S. federal
statutory rate......... (34.0)% (34.0)% (34.0)%
Tax losses not currently
benefited.............. 34.0 34.0 34.0
Foreign withholding
tax.................... 5.6 21.6 6.5
Other................... -- 0.9 0.4
-------- -------- --------
5.6% 22.5% 6.9%
======== ======== ========
|
At September 30, 1996, the Company has the following tax carryforwards which expire as follows (in thousands):
FEDERAL EXPIRES CALIFORNIA EXPIRES
------- --------- ---------- ---------
Net operating loss................. $8,900 2008-2009 $3,500 1998-2000
Foreign tax credits................ 2,440 1997-2001 -- --
Research and development credits... 562 2010 306 2010
|
The utilization of the Company's tax carryforwards may be subject to certain limitations in the case of an ownership change of the Company, as defined by the tax laws.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED):
The components of the net deferred tax assets are as follows (in thousands):
SEPTEMBER 30,
------------------
1995 1996
-------- --------
Deferred tax assets:
Deferred revenue..................................... $ 8,909 $ 9,206
Deferred compensation................................ 185 98
Depreciation and amortization expense................ 345 174
Other liabilities and reserves....................... 590 220
Foreign tax credits.................................. 2,531 2,440
Research and development credits..................... 840 868
Net operating loss................................... 1,500 3,361
-------- --------
Total deferred tax asset........................... 14,900 16,367
Deferred tax liability:
Deferred royalty cost................................ (474) (296)
Valuation allowance.................................... (14,426) (16,071)
-------- --------
Net deferred tax asset............................. $ -- $ --
======== ========
|
The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. Management periodically evaluates the recoverability of the deferred tax assets and recognizes the tax benefit only as reassessment demonstrates they are realizable. At such time, if it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced.
13. RELATED PARTY TRANSACTIONS:
Chromatic Research Inc. In February 1994, the Company licensed its interface technology to Chromatic Research, Inc. ("Chromatic") a multimedia processor design company. Under the terms of the license, Rambus received 626,053 shares of Chromatic Series B Preferred Stock (representing 5% of the then outstanding shares of Chromatic) and continuing royalties. Chromatic was formed in May 1993 (then called Xenon Microsystems Corporation) by, among others, Dr. Farmwald who continues to serve as a director of, and consultant to, Chromatic through the date hereof. Investors in Chromatic include affiliates of Mohr, Davidow Ventures, Merrill, Pickard, Anderson & Eyre and Kleiner, Perkins, Caufield & Byers. In connection with these investments in Chromatic, Dr. Davidow and Mr. Dunlevie joined and continue to sit on the Board of Directors of Chromatic. The initial valuation of the Chromatic stock, approximately $626,000, has been fully written down by the Company. Revenue recognized as license fees under this agreement was $69,000, $119,000 and $119,000 in the years ended September 30, 1994, 1995 and 1996, respectively, and $30,000 for the three months ended December 31, 1996. As of September 30, 1996 and December 31, 1996, the remaining balance of approximately $319,000 and $289,000, respectively, is included in deferred revenue.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS:
The Company operates in a single industry segment.
Six customers accounted for 82% and 75% of revenues in the years ended September 30, 1995 and 1996, respectively. Four customers accounted for 76% of revenues in the year ended September 30, 1994. Six customers accounted for 83% and two customers accounted for 45% of revenues for the three months ended December 31, 1995 and 1996, respectively.
The Company sells its technology to customers in the Far East and North America. The net income and loss for all periods presented are derived primarily from the Company's North American operations, which generates sales to the following geographic region (in thousands):
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 31, DECEMBER 31,
------------------------ -------------------
1994 1995 1996 1995 1996
------------------------ --------- ---------
(UNAUDITED)
Far East...................... $ 4,499 $ 6,619 $ 9,692 $ 2,240 $ 4,671
North America................. 501 745 1,578 270 820
------- ------- -------- --------- ---------
$ 5,000 $ 7,364 $ 11,270 $ 2,510 $ 5,491
======= ======= ======== ========= =========
15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the periods for taxes and interest are indicated below (in
thousands):
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------ -------------------
1994 1995 1996 1995 1996
------------------------ --------- ---------
(UNAUDITED)
Taxes......................... $351 $ 1,266 $286 $82 $208
Interest...................... $296 $ 297 $298 $81 $ 64
|
Supplemental schedule of noncash investing and financing activities:
The Company had no material noncash investing or financing activities in the year ended September 30, 1996. Noncash investing and financing activities are as follows (in thousands):
YEAR ENDED THREE MONTHS
SEPTEMBER 30, ENDED
------------- DECEMBER 31,
1994 1995 1996
------------- ------------
(UNAUDITED)
Acquisition of property equipment under
capital lease obligations.................... $ 158 $39 --
License of technology in exchange for common
stock........................................ $ 626 -- $1,200
|
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
16. PRO FORMA:
Upon the closing of an initial public offering of the Company's common stock that meets the criteria set out in Note 10, all the convertible preferred stock outstanding will convert into an aggregate of 11,296,822 shares of common stock. At December 31, 1996, the unaudited pro forma stockholders' deficit is adjusted for the conversion of the convertible preferred stock outstanding at December 31, 1996 and is disclosed on the face of the consolidated balance sheets.
17. SUBSEQUENT EVENTS:
On October 16, 1996, the Company entered into a loan and security agreement with Silicon Valley Bank to borrow up to $1,000,000 to finance equipment and tenant improvements. The loan matures in October 2000 and accrues interest at prime rate plus 1%. Following the sale of equity securities with proceeds of at least $15,000,000, the interest rate will decrease to prime rate plus 0.5%. The loan is collateralized by the Company's assets and is subject to financial covenants concerning liquidity, working capital, profitability and borrowings. The Company is in compliance with such financial covenants at December 31, 1996. At December 31, 1996, the Company had borrowed approximately $794,000 under this agreement.
In November 1996, the Company entered into an agreement with Intel Corporation for the development of high speed semiconductor memory interface technology. As part of this agreement, the Company issued a warrant on January 7, 1997 to purchase 1,000,000 shares of common stock of the Company at a purchase price of $10.00 per share. This warrant will become exercisable only upon the achievement of certain specified performance milestones, which will result in a charge to the statement of operations at the time achievement of these milestones becomes probable for the excess of the then fair value of the warrant over the exercise price.
In January 1997, the Board of Directors approved the reincorporation of the Company in Delaware. Under the new Certificate of Incorporation in Delaware, the Company is authorized to issue 60,000,000 shares of common stock and 16,336,096 shares of preferred stock at $.001 par value.
On February 28, 1997, the Board of Directors authorized management of the Company to file a Registration Statement with the Securities and Exchange Commission relating to a public offering of the Company's Common Stock. The Board also approved the termination of the 1990 Stock Plan upon the completion of the initial public offering, the adoption of a 1997 Employee Stock Purchase Plan, and the adoption of a 1997 Stock Plan (see description below). Additionally, the Board approved certain amendments to the Company's Certificate of Incorporation and Bylaws (including the establishment of a classified Board). The Board approved the creation of new Compensation Committee, an Audit Committee and a Stock Option Committee. Finally, the Board approved the establishment of a Stockholder Rights Plan pursuant to which each holder of the Company's common stock shall receive a right to purchase one- thousandth of a share of Series A Preferred Stock for $125 per right, subject to a number of conditions. Such rights are subject to adjustment in the event of a takeover or commencement of a tender offer not approved by the Board of Directors.
The 1997 Employee Stock Purchase Plan authorizes the granting of stock purchase rights to eligible employees during two-year offering periods with exercise dates approximately every six months. The Company has reserved 400,000 shares of common stock for issuance under the plan. The first offering period for the plan will commence on the effective date of this offering and will end on the last trading day in the period ending April 30, 1999. Shares are purchased through employees' payroll deductions at purchase prices equal to 85% of the lesser of the fair market value of the Company's common stock at either the first day of each offering period or the date of purchase.
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. SUBSEQUENT EVENTS--(CONTINUED) :
The 1997 Stock Plan authorizes the issuance of incentive stock options and nonstatutory stock options to employees and nonstatutory stock options to directors, employees or paid consultants of the Company. The Company has reserved 1,000,000 shares of common stock for issuance under the plan. The plan expires ten years after adoption, and the Board of Directors or a committee designated by the Board of Directors has the authority to determine to whom options will be granted, the number of shares, the vesting period and the exercise price (which generally cannot be less than 100% of the fair market value at the date of grant for incentive stock options). The options are exercisable at times and in increments as specified by the Board of Directors, and expire not more than ten years from date of grant.
LOGO
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of the Common Stock being registered hereby. All amounts are estimates except the SEC registration fee and the NASD filing fee.
AMOUNT TO BE
PAID BY
REGISTRANT
------------
SEC Registration Fee......................................... $10,455
NASD Filing Fee.............................................. 3,950
Nasdaq National Market Application Fee....................... *
Printing..................................................... *
Legal Fees and Expenses...................................... *
Accounting Fees and Expenses................................. *
Director and Officer Liability Insurance..................... *
Blue Sky Fees and Expenses................................... *
Custodial Fees............................................... *
Transfer Agent and Registrar Fees............................ *
Miscellaneous................................................ *
-------
Total.................................................... $ *
=======
|
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law Code authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Securities Act"). Article X of the Registrant's Amended and Restated Certificate of Incorporation and Article VI of the Registrant's Bylaws provide for mandatory indemnifications of its directors and officers and permissible indemnifications of employees and offer agents to the maximum extent permitted by the Delaware General Corporation Law. In addition, the Registrant has entered into Indemnification Agreements with its officers and directors. Reference is also made to Section of the Underwriting Agreement, which provides for the indemnification of officers, directors and controlling persons of the Registrant against certain liabilities and Section of the Rights Agreement, which provides for the cross indemnification of certain of the Registrant's stockholders and the Registrant, its officers and directors against certain liabilities under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years prior to the effective date of this Registration Statement, the Registrant has issued and sold the following unregistered securities:
1. During the period from February 28, 1994 through February 28, 1997, the Registrant granted options to purchase an aggregate of 2,790,900 shares of Common Stock to directors, employees and consultants pursuant to the Registrant's 1990 Option Plan in reliance on Rule 701 promulgated under the Securities Act.
II-1
2. On February 24, 1995, the Registrant issued and sold 1,882,353 shares of Series D Preferred Stock in a private placement to one accredited individual and to one institutional investor for an aggregate consideration of $8,000,000.25 in cash. Sales of Series D Preferred Stock were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act.
3. On January 7, 1997, the Registrant issued a warrant to purchase up to 1,000,000 shares of Common Stock at an exercise price of $10.00 per share to Intel Corporation in connection with the development and licensing arrangement entered into between the two companies in November 1996. The warrant expires, if not earlier exercised, no later than January 7, 2005.
II-2
ITEM 16. EXHIBITS
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
1.1 Form of Underwriting Agreement (draft dated March 5, 1997).
3.1* Form of Amended and Restated Certificate of Incorporation of
Registrant filed March , 1997.
3.2 Certificate of Designation of Rights, Preferences and Privileges of
Series E Participating Preferred Stock of Registrant.
3.3** Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the Offering made under
the Registration Statement.
3.4 Amended and Restated Bylaws of Registrant dated February 28, 1997.
4.1** Form of Registrant's Common Stock Certificate.
4.2 Amended and Restated Information and Registration Rights Agreement,
dated as of January 7, 1997, between Registrant and the parties
indicated therein.
4.3 Form of Preferred Shares Rights Agreement dated , 1997.
4.4 Common Stock Purchase Warrant dated January 7, 1997.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers.
10.2** Semiconductor Technology License Agreement, dated as of July 4,
1991, between Registrant and NEC Corporation, including supplements
and amendments thereto.
10.3** Semiconductor Technology License Agreement, dated as of December 9,
1994, between Registrant and Goldstar Electron Co., Ltd, including
supplements and amendments thereto.
10.4** Semiconductor Technology License Agreement, dated as of November 15,
1996, between Registrant and Intel Corporation.
10.5 1990 Stock Plan, as amended, and related forms of agreements.
10.6 1997 Stock Plan and related forms of agreements.
10.7 1997 Employee Stock Purchase Plan and related forms of agreements.
10.8** Facilities Lease
10.9** Form of Promissory Note between the Registrant and certain executive
officers.
11.1 Statement of computation of Net Loss Per Share and As Adjusted Net
Loss Per Share.
21.1 .Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Auditors.
23.2** Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-5).
27.1 Financial Data Schedule.
|
II-3
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of this prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing, as specified in the Underwriting Agreement, certificates in such denomination and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, STATE OF CALIFORNIA, ON MARCH 6, 1997.
Rambus Inc.
By: /s/ Gary G. Harmon
----------------------------------
GARY G. HARMON
|
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Geoffrey R. Tate and Gary G. Harmon, and each of them, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney- in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES STATED:
SIGNATURE TITLE DATE
/s/ Geoffrey R. Tate President, Chief March 6, 1997
- ------------------------------------- Executive Officer
GEOFFREY R. TATE and Director
(principal
executive officer)
/s/ Gary G. Harmon Vice President, March 6, 1997
- ------------------------------------- Finance and Chief
GARY G. HARMON Financial Officer
(principal
financial and
accounting officer)
/s/ William Davidow Chairman of the March 6, 1997
- ------------------------------------- Board
WILLIAM DAVIDOW
|
II-5
SIGNATURE TITLE DATE
/s/ Bruce Dunlevie Director March 6, 1997
- -------------------------------------
BRUCE DUNLEVIE
/s/ Michael Farmwald Director March 6, 1997
- -------------------------------------
MICHAEL FARMWALD
/s/ Charles M. Geschke Director March 6, 1997
- -------------------------------------
CHARLES M. GESCHKE
/s/ Mark Horowitz Director March 6, 1997
- -------------------------------------
MARK HOROWITZ
|
II-6
RAMBUS INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
VALUATION ALLOWANCE FOR DOUBTFUL ACCOUNTS
ADDITIONS
BALANCE CHARGED BALANCE
AT TO COSTS CHARGED AT END
BEGINNING AND TO OTHER OF
FOR THE YEAR ENDED: OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------- --------- --------- -------- ---------- -------
------- ------ ---- ---- -------
September 30, 1994............ -- -- -- -- --
======= ====== ==== ==== =======
September 30, 1995............ -- -- -- -- --
======= ====== ==== ==== =======
September 30, 1996............ -- -- -- -- --
======= ====== ==== ==== =======
THREE MONTHS ENDED:
- -------------------
December 31, 1996
(unaudited).................. -- -- -- -- --
======= ====== ==== ==== =======
VALUATION ALLOWANCE FOR DEFERRED TAX ASSET
ADDITIONS
BALANCE CHARGED BALANCE
AT TO COSTS CHARGED AT END
BEGINNING AND TO OTHER OF
FOR THE YEAR ENDED: OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------- --------- --------- -------- ---------- -------
------- ------ ---- ---- -------
September 30, 1994............ $ 7,476 $3,326 -- -- $10,802
======= ====== ==== ==== =======
September 30, 1995............ $10,802 $3,624 -- -- $14,426
======= ====== ==== ==== =======
September 30, 1996............ $14,426 $1,645 -- -- $16,071
======= ====== ==== ==== =======
THREE MONTHS ENDED:
- -------------------
December 31, 1996
(unaudited).................. $16,071 -- -- -- $16,071
======= ====== ==== ==== =======
|
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
1.1 Form of Underwriting Agreement (draft dated March 5,
1997).
3.1* Form of Amended and Restated Certificate of
Incorporation of Registrant filed March , 1997.
3.2 Certificate of Designation of Rights, Preferences and
Privileges of Series E Participating Preferred Stock
of Registrant.
3.3** Form of Amended and Restated Certificate of
Incorporation of Registrant to be filed upon the
closing of the Offering made under the Registration
Statement.
3.4 Amended and Restated Bylaws of Registrant dated
February 28, 1997.
4.1** Form of Registrant's Common Stock Certificate.
4.2 Amended and Restated Information and Registration
Rights Agreement, dated as of January 7, 1997, between
Registrant and the parties indicated therein.
4.3 Form of Preferred Shares Rights Agreement dated ,
1997.
4.4 Common Stock Purchase Warrant dated January 7, 1997.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
10.1 Form of Indemnification Agreement entered into by
Registrant with each of its directors and executive
officers.
10.2** Semiconductor Technology License Agreement, dated as of
July 4, 1991, between Registrant and NEC Corporation,
including supplements and amendments thereto.
10.3** Semiconductor Technology License Agreement, dated as of
December 9, 1994, between Registrant and Goldstar
Electron Co., Ltd, including supplements and
amendments thereto.
10.4** Semiconductor Technology License Agreement, dated as of
November 15, 1996, between Registrant and Intel
Corporation.
10.5 1990 Stock Plan, as amended, and related forms of
agreements.
10.6 1997 Stock Plan and related forms of agreements.
10.7 1997 Employee Stock Purchase Plan and related forms of
agreements.
10.8** Facilities Lease
10.9** Form of Promissory Note between the Registrant and
certain executive officers.
11.1 Statement of computation of Net Loss Per Share and As
Adjusted Net Loss Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., Independent
Auditors.
23.2** Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (See page II-5).
27.1 Financial Data Schedule.
|
** To be supplied by amendment.
EXHIBIT 1.1
DRAFT DATED MARCH 5, 1997
_______________ Shares
RAMBUS INC.
Common Stock, $.001 Par Value
UNDERWRITING AGREEMENT
__________, 1997
__________, 1997
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Rambus Inc., a Delaware corporation (the "Company"), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the "Underwriters"), an aggregate of ______ shares of the Common Stock, $.001 par value, of the Company (the "Firm Shares").
The Company also proposes to issue and sell to the several Underwriters not more than an additional ________ shares of its Common Stock, $.001 par value (the "Additional Shares"), if and to the extent that you, as Managers of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares." The shares of Common Stock, $.001 par value, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, including a prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter referred to as the "Registration Statement"; the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the "Prospectus." If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement.
l. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THE COMPANY REPRESENTS AND WARRANTS TO AND AGREES WITH EACH OF THE UNDERWRITERS THAT:
(a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph l(b) do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. The execution and delivery of the Agreement and Plan of Merger, dated as of ___________, 1997 (herein called the Merger Agreement) between Rambus Inc., a California corporation (herein called the California Corporation), and the Company, which will effect the reincorporation of the California Corporation under the laws of the State of Delaware on ____________, 1997, was duly authorized by all necessary corporate action on the part of each of the California Corporation and the Company. Each of the California Corporation and the Company has all corporate power and authority to execute and deliver the Merger Agreement, to file the Merger Agreement with the Secretary of State of California and the Secretary of State of Delaware and to consummate the reincorporation contemplated by the Merger Agreement, and the Merger Agreement at the time of execution and filing constitute a valid and binding obligation of each of the California Corporation and the Company, enforceable in accordance with its terms.
(d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and delivered by the Company.
(f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of the Shares to be sold by the Company have been duly authorized and are validly issued, fully paid and non-assessable.
(h) The Shares to be sold by the Company have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement.
(q) The Company has complied with all provisions of Section 517.075, Florida Statutes relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba.
(r) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its consolidated subsidiaries, except in each case as described in or contemplated by the Prospectus.
(s) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in or contemplated by the Prospectus.
(t) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them; the Company is not infringing or otherwise violating any patent, copyright, trade secret, trademark, service mark, trade name, technology, know-how or other proprietary information or material of others; and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in any material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
(u) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in or contemplated by the Prospectus, or, to the knowledge of
the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could result in any material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
(v) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole, except as described in or contemplated by the Prospectus.
(w) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, except as described in or contemplated by the Prospectus.
(x) Neither the Company nor any of its subsidiaries is in violation of any federal or state law or regulation relating to occupational safety and health or to the storage, handling or transportation of hazardous or toxic materials and the Company and its subsidiaries have received all permits, licenses or other approvals required of them under applicable federal and state occupational safety and health and environmental laws and regulations to conduct their respective businesses, and the Company and each such subsidiary is in compliance with all terms and conditions of any such permit, license or approval, except any such violation of law or regulation, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals which would not, singly or in the aggregate, result in a material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, except as described in or contemplated by the Prospectus.
(y) The Company and each of its subsidiaries maintain a system or internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(z) No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default in the due performance and observance of any term, covenant or condition of any indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective properties is bound or may be affected in any material adverse respect with regard to the property, business or operations of the Company and its subsidiaries.
(aa) The Company has timely filed all necessary federal, state and foreign income and franchise tax returns and has paid all taxes shown thereon as due, and there is no tax deficiency that has been or, to the Company's knowledge, might be asserted against the Company that could have a material adverse effect on the condition (financial or otherwise), earnings, operations, business or business prospects of the Company; and all tax liabilities are adequately provided for on the books of the Company
(ab) The financial statements, including the notes thereto, and supporting schedules included in the Registration Statement and the Prospectus present fairly the financial position of the Company as of the dates indicated and the results of its operations for the periods specified; except as otherwise stated in the Registration Statement, said financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis; and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, are correct and complete, and are in accordance with the books and records of the Company in all material respects. No other financial statements are required by Form S-1 or otherwise to be included in the Registration Statement or Prospectus.
(ac) The Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with the offering and sale of the Shares other than the Preliminary Prospectus, the Prospectus, the Registration Statement and the other materials permitted by the Securities Act.
(ad) The Company has (A) notified each holder of a currently outstanding option issued under the Company's 1990 Stock Plan (herein called the 1990 Plan) and each person who has acquired shares of Common Stock pursuant to the exercise of any option granted under the 1990 Plan that, pursuant to the terms of the 1990 Plan, none of such options or shares, or other securities of the Company, may be sold or otherwise transferred for a period of 240 days following the effective date of the Registration Statement; (B) along with the certain parties to that certain Amended and Restated Information and Registration Rights Agreement between the Company and certain investors, dated February 24, 1995 (herein called the Investors Rights Agreement), amended the Investors Rights Agreement, such that all parties to the Investors Rights Agreement are bound by "lock-up" provisions in substantially the same form as set forth in Exhibit A hereto; and (C) imposed a stop-transfer instruction with the Company's transfer agent in order to enforce the foregoing "lock-up" provisions. Each of the foregoing "lock-up" provisions shall be in full force and effect on the Closing Date.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company at $_____ a share (the "Purchase Price") the number of Firm Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the number of Firm Shares to be sold by the Company as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
On the basis or the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to ________________ Additional Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to exercise such option, you shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 180 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder or (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at $_______ a share (the "Public Offering Price") and to certain dealers selected by you at a price that represents a concession not in excess of $_____ a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $_____ a share, to any Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by the Company shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 A.M., New York City time, on __________, 1997, or at such other time on the same or such other date, not later than __________, 1997, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 A.M., New York City time, on the date specified in the notice described in
Section 3 or at such other time on the same or on such other late, in any event
not
later than __________,1997 as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the shares to the Underwriters duly paid, against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than __________ (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in clause (a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an opinion of Wilson Sonsini Goodrich & Rosati, outside counsel for the Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock outstanding prior to the issuance of the Shares to be sold by the Company have been duly authorized and are validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims;
(vi) the Shares to be sold by the Company have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non- assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights;
(vii) this Agreement has been duly authorized, executed and delivered by the Company;
(viii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement,
except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus under the captions "_____," "_____," "Description of Capital Stock" and "Underwriters" and (B) in the Registration Statement in Items 14 and 15, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein;
(x) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required;
(xi) the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds therefrom as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; and
(xii) such counsel (A) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules and other financial and statistical data included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (B) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(d) The Underwriters shall have received on the Closing Date an opinion of Fenwick & West LLP, counsel for the Underwriters, dated the Closing Date, covering the matters referred to in subparagraphs (vi), (vii), (ix) (but only as to the statements in the Prospectus under "Description of Capital Stock" and "Underwriters") and (xii) of paragraph (c) above.
With respect to subparagraph (xii) of paragraph (c) above, Wilson Sonsini Goodrich & Rosati and Fenwick & West LLP may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified.
The opinion of Wilson Sonsini Goodrich & Rosati described in paragraph
(c) above shall be rendered to the Underwriters at the request of the Company,
as the case may be, and shall so state therein.
(e) The Underwriters shall have received on the Closing Date an opinion of Blakely, Sokoloff, Taylor & Zafman, patent counsel for the Company, dated the Closing Date, to the effect that:
(i) The statements in the Registration Statement and Prospectus set forth in "___________" and "___________" are accurate and complete summaries of the matters set forth therein;
(ii) Neither the Registration Statement nor the Prospectus, including but not limited to "___________" and "___________," (A) contains any untrue statement of a material fact with respect to patents, patent rights, trade secrets, trademarks, service marks or other proprietary information or materials owned or used by the Company, or the manner of its use thereof, or any allegation on the part of any person that the Company is infringing any patents, patent rights, trade secrets, trademarks, service marks or other proprietary information or materials of any such person or (B) omits to state any material fact relating to patents, patent rights, trade secrets, trademarks, service marks or other proprietary information or materials owned or used by the Company, or the manner of its use thereof, or any allegation on the part of any person that the Company is infringing on any patents, patent rights, trade secrets, trademarks, service marks or other proprietary information or materials of any such person, that is necessary to make the statements therein not misleading;
(iii) Except as stated in the Registration Statement and Prospectus, there are no legal or governmental proceedings pending (other than routine administrative proceedings of the U.S. Patent and Trademark Office concerning pending patent and trademark or service mark applications of the Company) relating to patents, patent rights, trade secrets, trademarks, service marks or other proprietary information or materials of the Company, and no such proceedings are threatened or contemplated by governmental authorities or others;
(iv) We do not know of any contracts or other documents, relating to governmental regulation affecting the Company or the Company's patents, trademarks, service marks or other proprietary information or materials, of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus that are not filed or described as required;
(v) To the best of our knowledge, the Company is not infringing or otherwise violating any patents, trade secrets, trademarks, service marks or other proprietary information or materials, of others, and to the best of our knowledge, there are no infringements by others of any of the Company's patents, trademarks, service marks or other proprietary information or materials which in our judgment could affect materially the use thereof by the Company; and
(vi) To the best of our knowledge, the Company owns or possesses sufficient licenses or other rights to use all patents, trade secrets, trademarks, service marks or other proprietary information or materials necessary to conduct the business now being or proposed to be conducted by the Company as described in the Prospectus.
(f) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Coopers & Lybrand L.L.P., independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of Exhibit A hereto, between you and shareholders, option holders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 A.M. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in paragraph (c) below, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names
and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request.
(e) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve-month period ending June 30, 1998 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.
7. EXPENSES. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all expenses incident to the performance of their obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities herein above specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the Nasdaq National Market, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (ix) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 8 entitled "Indemnity and Contribution", and the last paragraph of Section 10 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make.
8. INDEMNITY AND CONTRIBUTION. (a) The Company, agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to paragraph (a) or (b) of this Section 8, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such control persons of any Underwriters, such firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in paragraph (e) of this Section 8. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
9. TERMINATION. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement by increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
Very truly yours,
Rambus Inc.
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company LLC
Acting severally on behalf of themselves
and the several underwriters named
herein.
By: Morgan Stanley & Co. Incorporated
SCHEDULE I
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company LLC
--------------
Total
==============
|
Exhibit A
RAMBUS INC.
LOCK-UP AGREEMENT
February 28, 1997
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
|
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan Stanley"), as Representative of the several Underwriters, proposes to enter into an Underwriting Agreement (the "Underwriting Agreement") with Rambus Inc., a Delaware corporation (the "Company") providing for the initial public offering (the "Public Offering") by the several Underwriters, including Morgan Stanley (the "Underwriters"), of Common Stock, $.001 par value per share, of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (collectively, the "Shares") (whether such Shares are now owned by the undersigned or are hereafter acquired), or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to the sale of any Shares to the Underwriters pursuant to the Underwriting Agreement. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the Prospectus, make any demand for, or exercise any right with respect to, the registration of any Shares.
Notwithstanding the foregoing, if the undersigned is an individual, he or she may transfer any or all of the Shares either during his or her lifetime or on death by gift, will or intestacy to his or her immediate family or to a trust the beneficiaries of which are exclusively the undersigned and/or a
Morgan Stanley & Co. Incorporated
February 28, 1997
member or members of his or her immediate family; provided, however, that in any such case, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding the Shares subject to the provisions of this Agreement, and there shall be no further transfer of such Shares except in accordance with this Agreement. For purposes of this paragraph, "immediate family" shall mean spouse, lineal descendant, father, mother, brother or sister of the transferor.
In addition, notwithstanding the foregoing, if the undersigned is a partnership, the partnership may transfer any Shares to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner, and any partner who is an individual may transfer any such Shares by gift, will or intestate succession to his or her spouse or lineal descendants or ancestors; if the undersigned is a trust, the trust may transfer any Shares to any beneficiary of such trust or to the estate of any such beneficiary, and any beneficiary who is an individual may transfer any such Shares by gift, will or intestate succession to his or her spouse or lineal descendants or ancestors; and if the undersigned is a corporation, the corporation may transfer any Shares to any shareholder of such corporation, and any shareholder who is an individual may transfer any such Shares by gift, will or intestate succession to his or her spouse or lineal descendant or ancestors; provided, however, that in any such case, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding the Shares subject to the provisions of this Agreement, and there shall be no further transfer of such Shares except in accordance with this Agreement.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to agreement between the Company and the Underwriters. This Agreement shall terminate and be of no further effect if the Registration Statement for the Public Offering is not declared effective by the Securities and Exchange Commission by December 31, 1997. The undersigned agrees and consents to the entry of stop transfer instructions with the Company's transfer agent against the transfer of securities of the Company held by the undersigned except in compliance with the terms and conditions of this Agreement.
Very truly yours,
(Address)
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RAMBUS INC.
Rambus Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
A. The name of the Corporation is Rambus Inc. The Corporation was originally incorporated under the same name and the original Certificate of Incorporation of the Corporation was filed with the Delaware Secretary of State on February 3, 1997.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and amends the provisions of the Certificate of Incorporation of this Corporation.
C. The text of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:
I. The name of the corporation (the "Corporation") is:
Rambus Inc.
II. The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
III. The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
IV. This Corporation is authorized to issue two classes of stock to be designated, respectively, Common Stock and Preferred Stock. The total number of shares of Common Stock this Corporation is authorized to issue is 60,000,000, $0.001 par value, and the total number of shares of Preferred Stock this Corporation is authorized to issue is 16,336,096, $0.001 par value. Of the Preferred Stock, 5,400,000 shares shall be designated Series A Preferred Stock ("Series A Preferred"), 2,803,743 shares shall be designated Series B Preferred Stock ("Series B Preferred"), 1,250,000 shares shall be designated Series C Preferred Stock ("Series C Preferred"), 1,882,353 shares shall be designated Series D Preferred Stock ("Series D Preferred"), and 5,000,000 shares shall be undesignated.
The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board). The Board of Directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.
The Corporation shall from time to time in accordance with the laws of the State of Delaware increase the authorized amount of its Common Stock if at any time the number of shares of Common Stock remaining unissued and available for issuance shall not be sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to or imposed on the respective classes of the shares of capital stock or the holders thereof are as follows:
A. Dividend Rights
The holders of the Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends on each outstanding share of Preferred Stock, payable in preference and priority to any payment of any dividend on any shares of Common Stock, of the Corporation, when and as declared by the Board of Directors. Such dividends on the Preferred Stock shall not exceed an annual rate of $.032 per share for the Series A Preferred Stock, $.1712 per share for the Series B Preferred Stock, $.24 for the Series C Preferred Stock, and $.34 per share for the Series D Preferred Stock, unless a dividend is paid at a higher rate (determined on an as-if-converted basis) on any other outstanding shares of the Corporation, in which event the dividends on the Preferred Stock shall be paid at such greater rate (determined on an as-if- converted basis). The right to such dividends on the Preferred Stock shall not be cumulative, and no right shall accrue to holders of Preferred Stock by reason of the fact that dividends on such shares are not declared or paid in any prior year. Dividends, if paid, or if declared and set apart for payment, must be paid on, or declared and set apart for payment on all outstanding Preferred Stock contemporaneously. No shares of Common Stock shall receive any dividend at a rate which is greater than the rate at which dividends are simultaneously paid in respect of the Preferred Stock (based on the number of shares of Common Stock into which the Preferred Stock is convertible on the date of dividend).
Dividends shall be paid by forwarding a check, postage pre-paid, to the address of each holder (or, in the case of joint holders, to the address of any such holder) of Preferred Stock as shown on the books of the Corporation, or to such other address as such holder specifies for such purpose by written notice to the Corporation. The forwarding of such check shall satisfy all obligations of the Corporation with respect to such dividends, unless such check is not paid upon timely presentation.
B. Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or not, the holders of Preferred Stock shall be entitled to receive, before any amount shall be
paid to holders of Common Stock, an amount per share equal to $.40 for the Series A Preferred Stock, $2.14 for the Series B Preferred Stock, $3.00 for the Series C Preferred Stock, and $4.25 for the Series D Preferred Stock (as adjusted for stock splits, combinations or similar events and hereafter referred to as "Original Issue Price"), plus all declared and unpaid dividends, if any. If, upon the occurrence of a liquidation, dissolution or winding up, the assets and surplus funds distributed among the holders of Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amount, then the entire assets and surplus funds of the Corporation legally available for distribution shall be distributed ratably among the holders of Preferred Stock based upon the total preferential amount each holder would be entitled to receive if sufficient funds were available to pay the full preferential amounts. If, upon the occurrence of a liquidation, dissolution or winding up, after the payment to the holders of Preferred Stock of the preferential amount, assets or surplus funds remain in the Corporation, the holders of Common Stock and Preferred Stock shall be entitled to receive ratably all such remaining assets and surplus funds in the same manner as if all shares of the Preferred Stock had been converted into Common Stock.
For purposes of this Section B, a liquidation, dissolution or winding up of the Corporation shall be deemed to be occasioned by, and to include, the Corporation's sale of all or substantially all of its assets or the acquisition of this Corporation by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of this Corporation for securities or consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary, unless the shareholders of the Corporation hold at least 50% of the voting power of the surviving corporation in such a transaction. No later than 20 days before any event that, pursuant to Section F(5), permits a holder of Preferred Stock to have each share of Preferred Stock held by such holder treated for all purposes as if it had been converted into Common Stock (for purposes of this Section B, a "Merger or Sale of the Corporation"), the Corporation shall deliver a notice to each holder of Preferred Stock setting forth the principal terms of such Merger or Sale of the Corporation. Such notice shall be deemed delivered upon personal delivery or five days after deposit in the United States mail, by registered or certified mail, addressed to a party at its address as shown on the stock records of the Corporation. Such notice shall include a description of the amounts that would be paid to holders of Preferred Stock under this Section B and of the consideration that such holders would receive if they exercised their rights under Section F(5) to have shares of Preferred Stock treated as if they had been converted into Common Stock. No later than ten days after delivery of the notice, each holder of Preferred Stock may deliver an election to the Corpora tion notifying the Corporation that the holder desires that such holder's shares of Preferred Stock be treated, pursuant to Section F, upon the closing of the Merger or Sale of the Corporation as if they had been converted into shares of Common Stock and, if no such notice is delivered, such holder shall receive such amounts as are provided for under this Section B.
Each holder of an outstanding share of Preferred Stock shall be deemed to have consented, for purposes of Section 502, 503 and 506 of the California Corporation Code, to distributions made by the Corporation in connection with the repurchase at cost (or such other price as may be agreed to by the Corporation's Board of Directors) of shares of Common Stock issued to or held by officers, directors or employees of, or consultants to, the Corporation or its subsidiaries upon termination of their employment or services pursuant to agreements (whether now existing or hereafter entered into) providing for the right of said repurchase between the Corporation and such persons.
C. Nonredeemable
The shares of Common Stock and the shares of Preferred Stock are nonredeemable.
D. Voting Rights
1. Vote Other than for Directors. The holders of Preferred Stock and
the holders of Common Stock shall be entitled to notice of any shareholders'
meeting and, except as otherwise required by law and Section 7 hereof, to vote
upon any matter submitted to the shareholders for a vote, other than the
election of directors, as follows: (i) the holders of Preferred Stock shall
have one vote for each full share of Common Stock into which their respective
shares of Preferred Stock are convertible on the record date for the vote and
(ii) the holders of Common Stock shall have one vote per share of Common Stock.
2. Voting for Directors. If, at any time, less than 4,000,000 shares
of Preferred Stock remain outstanding, then all directors shall be elected by
the holders of the Preferred Stock and by holders of the Common Stock, voting
together as a class in the manner provided in Section D(1). If, at any time,
4,000,000 or more shares of Preferred Stock are outstanding, then the holders of
shares of Preferred Stock voting as a class shall be entitled to elect two
directors, the holders of shares of Common Stock voting as a class shall be
entitled to elect two directors, and the remaining director or directors shall
be elected by the affirmative vote of the holders of the Preferred Stock and the
Common Stock, voting together as a class in the manner provided in Section D(1).
In the case of any vacancy in the office of a director elected by a specified
group of shareholders, a successor shall be elected to hold office for the
unexpired term of such director by the affirmative vote of a majority of the
shares of such specified group given at a special meeting of such shareholders
duly called or by an action by written consent for that purpose. Subject to
Section 303 of the California Corporations Code, any director who shall have
been elected by a specified group of shareholders may be removed during the
aforesaid term of office, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority of the shares of such specified
group, given at a special meeting of such shareholders duly called or by an
action by written consent for that purpose, and any such vacancy thereby created
may be filled by the vote of the holders of a majority of the shares of such
specified group represented at such meeting or in such consent.
E. Certain Taxes
The Corporation shall pay any and all issuance and other taxes (excluding any federal or state income taxes) that may be payable in respect of any issuance or delivery of shares of Common Stock on conversion of Preferred Stock. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock to which such issuance relates were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax, or it is established to the satisfaction of the Corporation that such tax has been paid.
F. Conversion to Common Stock
The Preferred Stock shall be convertible into Common Stock of the Corporation as follows:
1. Definitions. For purposes of this Section F the following definitions shall apply:
(a) "Issuance Date" with respect to any series of Preferred Stock shall mean the first date on which the Corporation issues any shares of any such series of Preferred Stock.
(b) "Conversion Price" shall mean the price, determined pursuant to this Section F, at which shares of Common Stock shall be deliverable upon conversion of Preferred Stock.
(c) "Current Conversion Price" shall mean the Conversion Price immediately before the occurrence of any event, which, pursuant to Section F(3), causes an adjustment to the Conversion Price.
(d) "Convertible Securities" shall mean any indebtedness or shares of stock convertible into or exchangeable for Common Stock, including Preferred Stock.
(e) "Options" shall mean any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.
(f) "Common Stock Outstanding" shall mean the aggregate of all Common Stock outstanding and all Common Stock issuable upon exercise of all outstanding Options and conversion of all outstanding Convertible Securities.
(g) "Distribution" shall have the meaning of the term "distribution to its shareholders" set forth in Section 166 of the California Corporations Code as in effect on the date of filing of these Amended and Restated Articles of Incorporation.
(h) "Common Stock Equivalents" shall mean Convertible Securities and rights entitling the holder thereof to receive directly, or indirectly, additional shares of Common Stock without the payment of any consideration by such holder for such additional shares of Common Stock or Common Stock Equivalents.
2. Right to Convert; Initial Conversion Price. Each holder of the Preferred Stock may, at any time, convert any or all of such Preferred Stock into fully-paid and non-assessable shares of Common Stock at the Conversion Price. Each share of Preferred Stock shall be convertible into the number of shares of Common Stock that results from dividing the Conversion Price in effect for such Preferred Stock at the time of conversion into $.40 for each share of Series A Preferred Stock being converted, $2.14 for each share of Series B Preferred Stock being converted, $3.00 for each share of Series C Preferred Stock being converted, and $4.25 for each share of Series D Preferred Stock being converted; the Conversion Price of the Preferred Stock shall initially be $.40 per share of Common Stock for the Series A Preferred Stock, $2.14 per share of Common Stock for the Series B Preferred Stock, $3.00 per share of Common Stock for the Series C Preferred Stock, and $4.25 per share of Common
Stock for the Series D Preferred Stock. Each initial Conversion Price shall be subject to adjustment from time to time in certain instances as hereinafter provided. No adjustments with respect to conversion shall be made on account of any dividends that may be declared but unpaid on the Preferred Stock surrendered for conversion, but no dividends shall thereafter be paid on the Common Stock unless such unpaid dividends have first been paid to the holders entitled to payment at the time of conversion of the Preferred Stock.
Before any holder of Preferred Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, to the office of the Corporation or any transfer agent for such Preferred Stock and shall given written notice to the Corporation at such office that he elects to convert the same. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Stock, or to his nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled, together with cash in lieu of any fraction of a share as hereinafter provided, and, if less than all of the shares of Preferred Stock represented by such certificate are converted, a certificate representing the shares of Preferred Stock not converted. Such conversion shall be deemed to have been made as of the date of such surrender of the certificate for the Preferred Stock to be converted, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock on such date. If the conversion is in connection with an offer of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock issuable upon such conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities.
3. Adjustments to Conversion Price. Subject to Section F(3)(h), the Conversion Price in effect from time to time for each series of Preferred Stock shall be subject to adjustment in certain cases as follows:
(a) Issuance of Securities. In case the Corporation shall at any time after the Issuance Date of any series of Preferred Stock issue or sell any Common Stock for a consideration per share less than the Current Conversion Price for such series of Preferred Stock, then, and thereafter successively upon each such issuance or sale, the Current Conversion Price of such series of Preferred Stock shall simultaneously with such issuance or sale be adjusted to a Conversion Price (calculated to the nearest cent) determined by dividing
(i) an amount equal to (i) the total number of shares of Common
Stock Outstanding when the Current Conversion Price for Preferred Stock became
effective multiplied by the Current Conversion Price for Preferred Stock, plus
(ii) the aggregate of the amount of all consideration, if any, received by the
Corporation for the issuance or sale of Common Stock since the Current
Conversion Price for Preferred Stock became effective, by
(ii) the total number of shares of Common Stock Outstanding immediately after such issuance or sale;
provided, however, that the Conversion Price shall at no time exceed $.40 for the Series A Preferred Stock or $2.14 for the Series B Preferred Stock or $3.00 for the Series C Preferred Stock or $4.25 for the Series D Preferred Stock (as adjusted for stock splits, combinations and similar events).
For the purposes of this subsection F(3)(a), the following provisions shall also be applicable:
(iii) Cash Consideration. In case of the issuance or sale of additional Common Stock for cash, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation for such shares (or, if such shares are offered by the Corporation for subscription, the subscription price, or, if such shares are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price), without deducting therefrom any compensation or discount paid or allowed to underwriters or dealers or others performing similar services or for any expenses incurred in connection therewith.
(iv) Non-Cash Consideration. In case of the issuance (otherwise than upon conversion or exchange of Convertible Securities) or sale of additional Common Stock, Options or Convertible Securities for a consideration other than cash or a consideration a part of which shall be other than cash, the fair value of such consideration as determined by the Board of Directors of the Corporation in the good faith exercise of its business judgment, irrespective of the accounting treatment thereof, shall be deemed to be the value, for purposes of this Section F, of the consideration other than cash received by the Corporation for such securities.
(v) Options and Convertible Securities. In case the Corporation shall in any manner issue or grant any Options or any Convertible Securities, the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities at the time such Convertible Securities first become convertible or exchangeable shall (as of the date of issue or grant of such Options or, in the case of the issue or sale of Convertible Securities other than where the same are issuable upon the exercise of Options, as of the date of such issue or sale) be deemed to be issued and to be outstanding for the purpose of this Section F(3)(a) and to have been issued for the sum of the amount (if any) paid for such Options or Convertible Securities and the amount (if any) payable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities at the time such Convertible Securities first become convertible or exchangeable; provided that, subject to the provisions of Section F(3)(b), no
further adjustment of the Conversion Price shall be made upon the actual issuance of any such Common Stock or Convertible Securities or upon the conversion or exchange of any such Convertible Securities.
(b) Change in Option Price or Conversion Rate. In the event that the purchase price provided for in any Option referred to in subsection F(3)(a)(iii), or the rate at which any Convertible Securities referred to in subsection F(3)(a)(iii) are convertible into or exchangeable for shares of Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution), the Current Conversion Price in effect at the time of such event shall forthwith be readjusted to the Conversion Price that would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. In the event that the purchase price provided for in any such Option referred to in subsection F(3)(a)(iii), or the additional consideration (if any) payable upon the conversion or exchange of any Convertible Securities referred to in subsection F(3)(a)(iii), or the rate at which any Convertible Securities referred to in subsection F(3)(a)(iii) are convertible into or exchangeable for shares of Common Stock, shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of shares of Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Security, the Current Conversion Price then in effect hereunder shall, upon issuance of such shares of Common Stock, be adjusted to such amount as would have obtained had such Option or Convertible Security never been issued and had adjustments been made only upon the issuance of the shares of Common Stock delivered as aforesaid and for the consideration actually received for such Option or Convertible Security and the Common Stock.
(c) Termination of Option or Conversion Rights. In the event of the termination or expiration of any right to purchase Common Stock under any Option or of any right to convert or exchange Convertible Securities, the Current Conversion Price shall, upon such termination, be changed to the Conversion Price that would have been in effect at the time of such expiration or termination had such Option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued, and the shares of Common Stock issuable thereunder shall no longer be deemed to be Common Stock Outstanding.
(d) Stock Splits, Dividends, Distributions and Combinations. In the event the Corporation should at any time or from time to time after the Issuance Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other Distribution payable in additional shares of Common Stock or Common Stock Equivalents, then, following such record date (or the date of such dividend, Distribution, split or subdivision if no record date is fixed), the Conversion Price of Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Preferred Stock shall be increased in proportion to such increase in the number of outstanding shares of Common Stock (including for this purpose, Common Stock Equivalents) determined in accordance with Section F(3)(f) If the number of shares of Common Stock outstanding at any time after the Issuance Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Preferred Stock shall be decreased in proportion to such decrease in the number of outstanding shares of Common Stock.
(e) Other Dividends. In the event this Corporation shall declare a Distribution payable in securities of other persons, evidences of indebtedness issued by this Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection F(3)(a)(iii), then, in each such case for the purpose of this Section F(3)(e), the holders of Preferred Stock shall be entitled to a proportionate share of any such Distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such Distribution.
(f) Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or a sale of assets transaction provided for elsewhere in the Section F) provision shall be made so that the holders of Preferred Stock shall thereafter be entitled to receive upon conversion of shares of Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section F with respect to the rights of the holders of Preferred Stock after the recapitalization to the end that the provisions of this Section F (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of shares of Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.
(g) Successive Changes. The above provisions of this Section F shall similarly apply to successive issuances, sales, dividends or other Distributions, subdivisions and combinations on or of the Common Stock after the Issuance Date.
(h) Other Events Altering Conversion Price. Upon the occurrence of any event not specifically denominated in this Section F as reducing the Conversion Price that, in the reasonable exercise of the business judgment of the Board of Directors of the Corporation requires, on equitable principles, the reduction of the Conversion Price, the Conversion Price will be equitably reduced.
(i) No Impairment. The Corporation will not, by amendment of these Amended and Restated Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section F and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of Preferred Stock against impairment.
(j) Miscellaneous Conversion Price Matters. The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares
of Common Stock deliverable upon conversion of all the then outstanding Preferred Stock and shall, at its own expense, take all such action and obtain all such permits and orders as may be necessary to enable the Corporation lawfully to issue such Common Stock upon the conversion of such Preferred Stock.
(k) Excluded Events. Notwithstanding anything in this Section F to the contrary, the Conversion Price shall not be adjusted by virtue of (i) the conversion of shares of Preferred Stock into shares of Common Stock, (ii) the repurchase of shares from the Corporation's employees, consultants, advisors, officers or directors at such person's cost (or at such other price as may be agreed to by the Corporation's Board of Directors), (iii) the issuance of, prior to the Series C Preferred Stock Issuance Date, 20,000 shares to Stanford University and 10,000 shares to the University of Illinois without consideration, (iv) the issuance of 1,125,000 shares of Common Stock (or options therefor) in connection with the merger of Rambus Partners, Inc. with and into Rambus Inc. prior to the Series C Preferred Stock Issuance Date, (v) the issuance and sale of, or the grant of options to purchase, an aggregate, net of returns to the option plan, of not more than 5,000,000 shares of Common Stock to employees, consultants, advisors, officers or directors of the Corporation and its subsidiaries (including shares issued or sold pursuant to the exercise of any stock option or purchase pursuant to a grant under the Corporation's stock option plan or stock purchase plan, even though granted by the Corporation prior to the date of the filing of these Amended and Restated Articles of Incorporation) at a price which is less than the Conversion Price at the time of such issuance or sale (all as determined in accordance with this Section F) as may be approved by the Board of Directors, none of such shares shall be included in any manner in the computation from time to time of the Conversion Price under subsection F(3)(a) or in Common Stock outstanding for purposes of such computation.
(l) No Fractional Shares. No fractional shares shall be issued upon conversion of shares of Preferred Stock and cash shall be paid in lieu of any fractional shares. Whether or not cash is due in lieu of fractional shares upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.
(m) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of Preferred Stock pursuant to this Section F, the Corporation, at its expense upon request by any holder of Preferred Stock, shall compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Current Conversion Price at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Preferred Stock.
4. Automatic Conversion. Immediately prior to the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation (or selling shareholders, if any) at a per share public offering price of not less than the Original Issue Price of the Series D
Preferred Stock (equitably adjusted for any stock split, combination or similar event) and an aggregate public offering price greater than $7,500,000, each share of Preferred Stock shall automatically be converted into shares of Common Stock at the Conversion Price for Preferred Stock then in effect. On and after said conversion date, notwithstanding that any certificates for the shares of Preferred Stock shall not have been surrendered for conversion, the shares of Preferred Stock evidenced thereby shall be deemed to be no longer outstanding, and all rights with respect thereto shall forthwith cease and terminate, except only the rights of the holder (i) to receive the shares of Common Stock to which he shall be entitled upon conversion thereof, (ii) to receive the amount of cash payable in respect of any fractional share of Common Stock to which he shall be entitled, and (iii) to receive payment of dividends declared but unpaid on Preferred Stock prior to such conversion date. In the event that any holder of Preferred Stock presents such holder's certificate therefor for surrender to the Corporation or its transfer agent upon such conversion, a certificate for the number of shares of Common Stock into which the shares of Preferred Stock surrendered were convertible on such conversion date promptly will be issued and delivered to such holder.
5. Merger; Sale of Corporation. In the event, after the Issuance
Date, of any proposed consolidation of the Corporation with, or merger of the
Corporation with or into another corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any reclassification of, or change in, the outstanding shares of
Common Stock), or in case of any proposed sale or transfer to another
corporation of all or substantially all of the assets of the Corporation, any
holder of Preferred Stock may, by delivery of election pursuant to Section B
above, elect to have each share of Preferred Stock held by such holder treated
for all purposes as if it had been converted into Common Stock on the earlier of
(i) the record date, if any, for voting by holders of Common Stock on such event
and (ii) the date of such event.
G. Covenants. In addition to any other rights provided by law, so long as any shares of Preferred Stock shall be outstanding, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Preferred Stock voting separately as a class:
1. amend or repeal any provision of, or add any provision to, the Corporation's articles of incorporation or by-laws if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Preferred Stock, or increase or decrease the number of shares of Preferred Stock authorized hereby;
2. authorize or issue shares of any class or series of stock not authorized herein having any preference or priority as to dividends or assets superior to or on a parity with any such preference or priority of Preferred Stock; authorize or issue shares of stock of any class or series of any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of stock of this Corporation having any preference or priority as to dividends or assets superior to or on a parity with any such preference or priority of Preferred Stock (other than the issuance of Shares Subject to Call under the Series B Preferred Stock Purchase Agreement);
3. reclassify any class or series or any Common Stock into shares having any preference or priority as to dividends or assets superior to or on a parity with any such preference or priority of Preferred Stock;
4. apply any of its assets to the redemption, retirement, purchase or acquisition, directly or indirectly, through subsidiaries (as defined in Section 425 of the Internal Revenue Code of 1986 (the "Code") or otherwise, of any shares of any class or series of Common Stock, except from employees, consultants, advisors, officers and directors of, and persons performing services for, this Corporation or its subsidiaries on terms approved by the Board of Directors upon termination of employment or association;
5. do any act or thing which would result in taxation of the holders of shares of the Preferred Stock under Section 305 of the Code (or any comparable provision of the Code as hereafter from time to time amended); or
6. (i) sell, convey or otherwise dispose of all or substantially all of its property or business, or (ii) merge into or consolidate with any other corporation (other than a wholly owned subsidiary corporation) or effect any other transaction or series of related transactions disposing or more than 50% of the voting power of the Corporation.
H. Status of Converted or Redeemed Stock. In the event any shares of Preferred shall be redeemed or converted, the shares so converted or redeemed shall be canceled and shall not have the status of authorized but unissued shares of Preferred and shall not be issuable by the corporation and the Certificate of Incorporation of this corporation shall be amended to effect the corresponding reduction in the corporation's capital stock.
V. The name and mailing address of the incorporator are as follows:
J. Michael Arrington c/o Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304-1050
VI. The Corporation is to have perpetual existence.
VII. Elections of directors need not be by written ballot unless a stockholder demands election by written ballot at the meeting and before voting begins or unless the Bylaws of the Corporation shall so provide.
VIII. The number of directors which constitute the whole Board of Directors of the Corporation shall be designated in the Bylaws of the Corporation. The directors shall be divided into two classes with the term of office of the first class (Class I) to expire at the annual meeting of stockholders in 1998; the term of office of the second class (Class II) to expire at the annual meeting of stockholders held in 1999;
and thereafter for each such term to expire at each second succeeding annual meeting of stockholders after such election.
IX. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation.
X. (a) To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach fiduciary duty as a director.
(b) The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer or employee of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation.
(c) Neither any amendment nor repeal of this Article X, nor the adoption of any provision of this Corporation's Certificate of Incorporation inconsistent with this Article X, shall eliminate or reduce the effect of this Article X, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article X, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
XI. Following the effectiveness of the registration of any class of securities of the Corporation pursuant to the requirements of the Securities Exchange Act of 1934, as amended, no action shall be taken by the stockholders of the Corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws and no action shall be taken by the stockholders by written consent. The affirmative vote of sixty-six and two- thirds percent (66 2/3%) of the then issued and outstanding voting securities of the Corporation, voting together as a single class, shall be required for the amendment, repeal or modification of the provisions of Article VIII or Article XI of this Restated Certificate of Incorporation or Sections 2.3 (Special Meeting), 2.11 (Stockholder Action by Written Consent without a Meeting) or 2.15 (Advance Notice of Stockholder Nominees and Stockholder Business) of the Corporation's Bylaws.
XII. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by Gary Harmon, its Secretary, this 10th day of March 1997.
EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES E PARTICIPATING PREFERRED STOCK
OF RAMBUS INC.
The undersigned, Geoff Tate and Gary Harmon do hereby certify:
1. That they are the duly elected and acting President and Secretary, respectively, of Rambus Inc., a Delaware corporation (the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the said Corporation, the said Board of Directors on February 28, 1997 adopted the following resolution creating a series of 40,000 shares of Preferred Stock designated as Series E Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors of the corporation by the Restated Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock of the Corporation and does hereby fix and herein state and express the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of such series of Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be designated as "SERIES E PARTICIPATING PREFERRED STOCK." The Series E Participating Preferred Stock shall have a par value of $0.001 per share, and the number of shares constituting such series shall be 40,000.
Section 2. Proportional Adjustment. In the event the Corporation shall at any time after the issuance of any share or shares of Series E Participating Stock (i) declare any dividend on Common Stock of the Corporation ("COMMON STOCK") payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Corporation shall simultaneously effect a proportional adjustment to the number of outstanding shares of Series E Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series E Participating Preferred Stock with respect to dividends, the holders of shares of Series E Participating Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last day of January, April, July and October in each year (each such date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series E Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series E Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the Series E Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series E Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series E Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series E Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series E Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series E Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series E Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series E Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of shares of Series E Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) Except as required by law, holders of Series E Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions
(a) The Corporation shall not declare any dividend on, make any distribution on, or redeem or purchase or otherwise acquire for consideration any shares of Common Stock after the first issuance of a share or fraction of a share of Series E Participating Preferred Stock unless concurrently therewith it shall declare a dividend on the Series E Participating Preferred Stock as required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or distributions payable on the Series E Participating Preferred Stock as provided in Section 3 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series E Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series E Participating Preferred Stock;
(ii) declare or pay dividends on, make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with Series E Participating Preferred Stock, except dividends paid ratably on the Series E Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series E Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of Series E Participating Preferred Stock, or any shares of stock ranking on a parity with the Series E Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner.
Section 6. Reacquired Shares. Any shares of Series E Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein and, in the Restated Certificate of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series E Participating Preferred Stock shall be entitled to receive an aggregate amount per share equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends on such shares of Series E Participating Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transactions in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series E Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.
Section 9. No Redemption. The shares of Series E Participating Preferred Stock shall not be redeemable.
Section 10. Ranking. The Series E Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 11. Amendment. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preference or special rights of the Series E Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series E Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series E Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series E Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of this corporation be, and they hereby are, authorized and directed to prepare and file a Certificate of Designation of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of Delaware law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution."
We further declare under penalty of perjury that the matters set forth in the foregoing Certificate of Designation are true and correct of our own knowledge.
Executed at Mountain View, California, on March 21, 1997.
/s/ GEOFF TATE ________________________ Geoff Tate, President /s/ GARY HARMON ________________________ Gary Harmon, Secretary |
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
RAMBUS INC.
TABLE OF CONTENTS
PAGE
-----
ARTICLE I - CORPORATE OFFICES.................................................... 1
1.1 REGISTERED OFFICE....................................................... 1
1.2 OTHER OFFICES........................................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS............................................ 1
2.1 PLACE OF MEETINGS....................................................... 1
2.2 ANNUAL MEETING.......................................................... 1
2.3 SPECIAL MEETING......................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS........................................ 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................ 2
2.6 QUORUM.................................................................. 2
2.7 ADJOURNED MEETING; NOTICE............................................... 3
2.8 CONDUCT OF BUSINESS..................................................... 3
2.9 VOTING.................................................................. 3
2.10 WAIVER OF NOTICE........................................................ 4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING................. 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS............. 4
2.13 PROXIES................................................................. 5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE................................... 5
2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS......... 6
ARTICLE III - DIRECTORS.......................................................... 7
3.1 POWERS.................................................................. 7
3.2 NUMBER OF DIRECTORS..................................................... 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS................. 7
3.4 RESIGNATION AND VACANCIES............................................... 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................................ 8
3.7 REGULAR MEETINGS........................................................ 9
3.8 SPECIAL MEETINGS; NOTICE................................................ 9
3.9 QUORUM.................................................................. 9
3.11 WAIVER OF NOTICE........................................................ 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................... 10
3.13 FEES AND COMPENSATION OF DIRECTORS...................................... 10
3.14 APPROVAL OF LOANS TO OFFICERS........................................... 10
|
TABLE OF CONTENTS
(CONTINUED)
PAGE
-----
3.15 REMOVAL OF DIRECTORS.................................................... 11
ARTICLE IV - COMMITTEES.......................................................... 11
4.1 COMMITTEES OF DIRECTORS................................................. 11
4.2 COMMITTEE MINUTES....................................................... 12
4.3 MEETINGS AND ACTION OF COMMITTEES....................................... 12
ARTICLE V - OFFICERS............................................................. 12
5.1 OFFICERS................................................................ 12
5.2 APPOINTMENT OF OFFICERS................................................. 13
5.3 SUBORDINATE OFFICERS.................................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS..................................... 13
5.5 VACANCIES IN OFFICES.................................................... 13
5.6 CHAIRMAN OF THE BOARD................................................... 13
5.7 CHIEF EXECUTIVE OFFICER................................................. 14
5.8 PRESIDENT............................................................... 14
5.9 VICE PRESIDENTS......................................................... 14
5.10 SECRETARY............................................................... 14
5.11 CHIEF FINANCIAL OFFICER................................................. 15
5.12 ASSISTANT SECRETARY..................................................... 15
5.13 ASSISTANT TREASURER..................................................... 15
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.......................... 16
5.15 AUTHORITY AND DUTIES OF OFFICERS........................................ 16
ARTICLE VI - INDEMNITY........................................................... 16
6.1 THIRD PARTY ACTIONS..................................................... 16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION........................... 17
6.3 SUCCESSFUL DEFENSE...................................................... 17
6.4 DETERMINATION OF CONDUCT................................................ 17
6.5 PAYMENT OF EXPENSES IN ADVANCE.......................................... 18
6.6 INDEMNITY NOT EXCLUSIVE................................................. 18
6.7 INSURANCE INDEMNIFICATION............................................... 18
6.8 THE CORPORATION......................................................... 18
6.9 EMPLOYEE BENEFIT PLANS.................................................. 19
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES................................................................ 19
|
TABLE OF CONTENTS
(CONTINUED)
PAGE
-----
ARTICLE VII - RECORDS AND REPORTS................................................ 19
7.1 MAINTENANCE AND INSPECTION OF RECORDS................................... 19
7.2 INSPECTION BY DIRECTORS................................................. 20
7.3 ANNUAL STATEMENT TO STOCKHOLDERS........................................ 20
ARTICLE VIII - GENERAL MATTERS................................................... 20
8.1 CHECKS.................................................................. 20
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS........................ 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.................................. 21
8.4 SPECIAL DESIGNATION ON CERTIFICATES..................................... 21
8.5 LOST CERTIFICATES....................................................... 22
8.6 CONSTRUCTION; DEFINITIONS............................................... 22
8.7 DIVIDENDS............................................................... 22
8.8 FISCAL YEAR............................................................. 22
8.9 SEAL.................................................................... 22
8.10 TRANSFER OF STOCK....................................................... 23
8.11 STOCK TRANSFER AGREEMENTS............................................... 23
8.12 REGISTERED STOCKHOLDERS................................................. 23
ARTICLE IX - AMENDMENTS.......................................................... 23
|
AMENDED & RESTATED
BYLAWS
OF
RAMBUS INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. At the meeting, directors shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by a majority of the Board of Directors of the Corporation. No other person or persons are permitted to call a special meeting. No business may be conducted at a special meeting other than the business specified by the Board of Directors as specified in its notice of calling of the meeting delivered to the Corporation as provided below by Section 2.4 and 2.5.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or as may be otherwise required by applicable law, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.
Except as may be otherwise provided in the certificate of incorporation or these bylaws, or as may be otherwise required by applicable law:
(i) in all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders;
(ii) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors; and
(iii) where a separate vote by a class or classes or series is required, the affirmative vote of the majority of shares of such class or classes or series present in person or represented by proxy at the meeting shall be the act of such class or classes or series.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.
Effective upon the closing of a firm commitment underwritten initial public offering of any of the corporation's securities pursuant to a registration statement on Form S-1 filed under the Securities Act of 1933, as amended, the stockholders of the corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed.
(iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for the stockholder by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting, nominations for the election of director or other business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder. For such nominations or other business to be considered properly brought before the meeting by a stockholder, such stockholder must have given timely notice and in proper form of his intent to bring such business before such meeting. To be timely, such stockholder's notice must be delivered to or mailed and received by the secretary of the corporation not less than 90 days prior to the meeting; provided, however, that in the event that less than 100 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper form, a stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends to make the nominations, propose the business, and, as the case may be, the name and address of the person or persons to be nominated or the nature of the business to be proposed;
(ii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the business specified in the notice;
(iii) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than three (3) nor more than seven (7). The exact number of directors shall be six (6) until changed, within the limits specified above, by a bylaw amending this Section 3.2, duly adopted by the board of directors or by the stockholders. The indefinite number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to the Certificate of Incorporation or by an amendment to this bylaw duly adopted by the board of directors or by the stockholders.
No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until the director's earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these bylaws:
(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), then the Court of Chancery
may, upon application of any stockholder or stockholders holding at least ten
(10) percent of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which election
shall be governed by the provisions of Section 211 of the General Corporation
Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or a majority of the directors.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is
not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.10 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
3.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee
who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series) [VOTING RIGHTS?], (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.11
(waiver of notice), and Section 3.12 (action without a meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a chairman of the board or a president or both, a secretary and a chief financial officer/treasurer. The corporation may also have, at the discretion of the board of directors, a chief executive officer, one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other
officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the board of directors or as may be prescribed by these bylaws. If there is no chief executive officer and no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws.
5.7 CHIEF EXECUTIVE OFFICER
Subject to the supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. In the absence or nonexistence of a chairman of the board, the chief executive officer shall preside at meetings of the board of directors. The chief executive officer shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8 PRESIDENT
The president shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board and a chief executive officer, at all meetings of the board of directors. The president shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. If there is no chief executive officer, then the president shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolu tion of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.12 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
5.13 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws.
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
5.15 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding any other provision of this Article VI, no person shall be indemnified hereunder for any expenses or amounts paid in settlement with respect to any action to recover short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing, a director, officer, employee or agent of the Corporation shall be entitled to contest any determination that the director, officer, employee or agent has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that the individual is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted pursuant to the other sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in any such capacity or arising out of the person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the provisions of Section 6.4) with respect to the resulting or surviving corporation as the person would have with respect to such constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records,the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if the person were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the owner's legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
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.
EXHIBIT 4.2
RAMBUS INC.
AMENDED AND RESTATED
INFORMATION AND REGISTRATION RIGHTS AGREEMENT
TABLE OF CONTENTS
1. Certain Definitions.................................................. 1
2. Financial Statements and Reports to Shareholders..................... 2
3. Additional Information............................................... 3
4. Inspection........................................................... 3
5. Termination of Covenants; Delivery of Public Information............. 3
6. Investor Representation at Board Meetings............................ 4
7. Right of First Refusal............................................... 6
7.1 Right of First Refusal.......................................... 6
7.2 Pro Rata Share.................................................. 6
7.3 New Securities.................................................. 6
7.4 Procedure....................................................... 6
8. Demand Registration.................................................. 7
8.1 Request for Registration on Form Other Than Form S-3............ 7
8.2 Right of Deferral of Registration............................... 7
8.3 Request for Registration on Form S-3............................ 7
8.4 Registration of Other Securities in Demand Registration......... 8
8.5 Underwriting in Demand Registration............................. 8
8.6 Blue Sky in Demand Registration................................. 9
9. Piggyback Registration............................................... 9
9.1 Notice of Piggyback Registration and Inclusion of
Registrable Securities......................................... 9
9.2 Underwriting in Piggyback Registration.......................... 9
9.3 Blue Sky in Piggyback Registration.............................. 11
10. Expenses of Registration............................................. 11
11. Registration Procedures.............................................. 11
12. Information Furnished by Holder...................................... 11
13. Indemnification...................................................... 12
13.1 Company's Indemnification of Holders........................... 12
13.2 Holder's Indemnification of Company............................ 12
13.3 Indemnification Procedure...................................... 13
|
TABLE OF CONTENTS
(CONTINUED)
14. Limitations on Registration Rights Granted to Other Securities....... 13
15. Transfer of Rights................................................... 13
16. Market Stand-off..................................................... 14
17. Conversion of Preferred Stock........................................ 14
18. Miscellaneous........................................................ 14
18.1 Termination of Prior Agreements, Rights and Obligations........ 14
18.2 Entire Agreement; Successors and Assigns....................... 14
18.3 Governing Law.................................................. 15
18.4 Counterparts................................................... 15
18.5 Headings....................................................... 15
18.6 Notices........................................................ 15
18.7 Amendment of Agreement......................................... 15
|
AMENDED AND RESTATED
INFORMATION AND REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED INFORMATION AND REGISTRATION RIGHTS AGREEMENT
(the "Agreement") is made as of January 7, 1997, by and among Rambus Inc., a
California corporation (the "Company"), and the persons listed on the attached
Schedule A (collectively, the "Investors").
R E C I T A L S
A. The Company and the Investors have entered into agreements for sale by the Company and purchase by the Investors the Company's securities.
B. The Company and certain existing investors in the Company are parties to a Prior Registration Rights Agreement (as defined below), pursuant to which the Company granted such investors certain information rights and registration rights with respect to the Company's securities.
C. In connection with the issuance of a warrant for the purchase of 1,000,000 shares of Common Stock (the "Warrant") to Intel Corporation, the Company and the Investors desire to amend and restate the rights of the Investors with respect to information about the Company and registration of the Common Stock issued upon conversion or exercise of the securities according to the terms of this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(b) "Convertible Securities" shall mean the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the Company, the Warrant, and the Common Stock of the Company issued or issuable upon conversion thereof.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
(d) "Form S-3" shall mean Form S-3 issued by the Commission or any substantially similar form then in effect.
(e) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such holder is an
Investor or an assignee or transferee of Registration rights as permitted by
Section 15.
(f) "Initiating Holders" shall mean Holders who in the aggregate hold at least fifty percent (50%) of the Registrable Securities (or any Holders in the case of Section 8.3).
(g) "Material Adverse Event" shall mean an occurrence having a consequence that either (a) is materially adverse as to the business, properties, prospects or financial condition of the Company or (b) is reasonably foreseeable, has a reasonable likelihood of occurring, and if it were to occur might materially adversely affect the business, properties, prospects or financial condition of the Company.
(h) "Prior Registration Rights Agreement" shall mean the Amended and Restated Information and Registration Rights Agreement dated as of February 24, 1995, by and among Rambus Inc. and the investors listed on Schedule A thereto.
(i) The terms "Register", "Registered" and "Registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act ("Registration Statement"), and the declaration or ordering of the effectiveness of such Registration Statement.
(j) "Registrable Securities" shall mean all Common Stock not previously sold to the public issued or issuable upon conversion or exercise of any of the Company's Convertible Securities purchased by or issued to the Investors, including Common Stock issued in respect of the Conversion Stock pursuant to stock splits, stock dividends and similar distributions, and any securities of the Company granted registration rights pursuant to Section 14 of this Agreement.
(k) "Registration Expenses" shall mean all expenses incurred by the Company in complying with Sections 8 or 9 of this Agreement, including, without limitation, all federal and state registration, qualification and filing fees, printing expenses, fees and disbursements of counsel for the Company and one special counsel for Holders (if different from the Company), blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration.
(l) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
(m) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities pursuant to this Agreement.
(n) "Warrant Stock" shall mean the Common Stock of the Company issued or issuable upon the exercise of the Warrant (or any similar warrant issued pursuant to the transfer or exchange thereof), including Common Stock issued in respect thereof pursuant to stock splits, stock dividends and similar distributions.
2. Financial Statements and Reports to Shareholders.
The Company shall deliver the Investors as soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, an audited consolidated balance sheet of the Company as of the end of such year and audited consolidated statements of income, shareholders' equity and changes in financial position for such year, which year-end financial reports shall be in reasonable detail and shall be accompanied by the opinion of independent public accountants of recognized standing selected by the Company. In addition, the Company shall deliver to the Investors: (a) as soon as practicable after the end of each fiscal quarter of the Company, and in any event within 45 days thereafter, unaudited financial statements
of the Company on a quarterly basis prepared in accordance with generally accepted accounting principles and fairly reflecting the fiscal affairs of the Company to the date thereof, and (b) contemporaneously with delivery to holders of Common Stock, a copy of each report of the Company delivered to holders of Common Stock .
3. Additional Information.
As long as an Investor (together with any affiliate) or its transferee holds not less than 15% of the Warrant Stock originally issuable (or a Warrant representing such amount of Warrant Stock), or 5% of the Series A Preferred Stock of the Company originally issued, or 15% of the Series B Preferred Stock of the Company originally issued, or 15% of the Series C Preferred Stock of the Company originally issued, or 15% of the Series D Preferred Stock of the Company originally issued (or an equivalent number of shares consisting of Registrable Securities issued upon conversion or exercise of such Preferred Stock of the Company or a combination of such Preferred Stock and Registrable Securities issued upon conversion thereof), as adjusted for recapitalizations, stock splits, stock dividends and the like, the Company will deliver to such Investor:
(a) As soon as practicable after the end of each month, and in any event within 30 days thereafter, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such month, and consolidated statements of income and cash flow for such month and for the current fiscal year to date.
(b) As soon as practicable following submission to and approval by the Board of Directors of the Company, but in no event later than 90 days after the end of each fiscal year, each operating budget and plan (the "Plan") respecting the next fiscal year and a summary of each such Plan containing a monthly financial budget together with any update of the Plan as such update is prepared.
4. Inspection.
The Company shall permit each Investor, at such Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by each such Investor; provided, however, that the Company shall not be obligated pursuant to this Section 4 to provide any information which it reasonably considers to be a trade secret or confidential information. Subject to Section 5, the rights of an Investor under this Section 4 may not be assigned as part of such Investor's sale of any of the Registrable Securities or Convertible Securities except with the consent of the Company, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Stone Street Fund 1994, L.P., Stone Street Fund 1995, L.P., Bridge Street Fund 1994, L.P., and Bridge Street Fund 1995, L.P. shall be entitled to the rights provided under this Section 4 upon the assignment of any of the Registrable Securities to them, respectively, by GS Capital Partners, L.P.
5. Termination of Covenants; Delivery of Public Information.
(a) The covenants of the Company set forth in Sections 2, 3, 4, 6(a),
6(b), 6(c), and 7 shall be terminated and be of no further force or effect upon
the earlier of (a) the date when a Registration Statement filed by the Company
under the Securities Act, in connection with the first public offering of its
securities (other than either a public offering limited solely to employees of
the Company or an offering pursuant to Rule 145 under the Securities Act)
becomes effective and (b) the date the Company (i) registers any securities
under the Exchange Act or (ii) first becomes subject to the periodic reporting
requirements of Section 13 or
Section 15(d) of the Exchange Act, and such covenants shall terminate as to any Investor as of the date such Investor no longer holds any shares of the capital stock of the Company.
(b) The covenants of the Company set forth in Sections 8 and 9 shall be terminated and shall be of no further force or effect upon March 30, 2005.
(c) Until the third anniversary of the event described in Section
5(a), the Company shall deliver to any Investor or its transferee who holds not
less than 15% of the Warrant Stock originally issuable (or a Warrant
representing such amount of Warrant Stock), a copy of the Company's reports
(without exhibits) on Forms 10-K, 10-Q, 8-K and its Annual Reports to
Shareholders promptly after such documents are filed with the Commission.
6. Investor Representation at Board Meetings.
(a) Each Investor or transferee holding at least 10% of the Series A Preferred Stock of the Company originally issued (or an equivalent number of shares consisting of Registrable Securities issued upon conversion or exercise of such Series A Preferred Stock of the Company or a combination of such Series A Preferred Stock and Registrable Securities issued upon conversion thereof), as adjusted for recapitalizations, stock splits, stock dividends and the like, shall have the right to receive notices (except with respect to previously unscheduled telephonic meetings) and minutes of each meeting of the Board as if such Investor were a director, and to designate one of its constituent partners to attend all Board meetings, and to speak at or otherwise participate in such meetings to the extent permitted by the Board; provided, however, that such person may disclose or use any information made known to him by virtue of such notice, minutes or attendance only to the extent consistent with the fiduciary obligations of a director of the Company, whether or not such person actually is a director. Such Investors' rights to notice, attendance and minutes shall be assignable only with the prior written consent of the Company, which consent shall not be unreasonably withheld.
(b) The Investors holding Series B Preferred Stock of the Company or Registrable Securities issued upon conversion thereof shall have the right, jointly, to have either John Powell or Roger McNamee attend regular meetings of the Company's Board of Directors, provided that before any such attendance Mr. Powell or Mr. McNamee, as applicable, shall have executed a confidentiality and non-disclosure agreement in a form reasonably acceptable to the Company.
(c) GS Capital Partners, L.P. shall have the right to have either Joseph H. Gleberman or Terence M. O'Toole attend and observe meetings of the Board, provided that only one of such designees shall be allowed to attend any particular Board meeting. Such representatives shall receive notices and minutes of each meeting, and materials distributed to members of the Board in their capacities as such. Such representatives shall not be Board members (unless elected to the Board in accordance with the Company's Articles of Incorporation and Bylaws), nor shall such representatives have the power to vote as Board members or the right to receive compensation, if any, paid to Board members in their capacities as such. Before any attendance at Board meetings is allowed, the Company may require such representatives to execute a confidentiality and non-disclosure agreement in a form mutually acceptable to the Company and such representatives. Such representatives may only disclose or use information made known to them by virtue of the notice, minutes, or materials provided or attendance allowed hereunder to the extent consistent with the fiduciary duties of a director of the Company, whether or not such representative actually is a director. Notwithstanding the foregoing, if the Board makes a good faith determination that it would be inappropriate
to allow such representatives to attend all or a portion of a Board meeting or to provide such representatives with minutes or materials, for reasons relating to attorney-client privilege, securities law compliance, transactions or potential transactions between the Company and GS Capital Partners, L.P. or Goldman, Sachs & Co. or any affiliate thereof, or if, in the reasonable good faith judgment of the Board of Directors such attendance would be harmful to the Company, then the Company shall so indicate in the notice of such meeting to GS Capital Partners, L.P., setting forth the basis of its decision to exclude GS Capital Partners, L.P., and shall not be obligated to allow such attendance or to provide such minutes or materials. The rights of GS Capital Partners, L.P. under this Section 6(c) shall be nonassignable. In the event that a GS Capital Partners, L.P. representative designated under this Section 6(c) shall permanently cease to be available to attend and observe meetings of the Board, GS Capital Partners, L.P. shall have the right to designate a replacement reasonably acceptable to the Company.
(d) (i) Intel Corporation shall have the option, subject to the conditions described below, to designate an individual to attend and observe meetings of the Board. Unless elected to the Board pursuant to Section 6(d)(ii) below or otherwise in accordance with the Company's Articles of Incorporation and Bylaws, such designee shall not be a Board member, nor shall such designee have the power to vote as a Board member or the right to receive compensation, if any, paid to Board members in their capacities as such. The right to designate a Board observer pursuant to this Section 6(d)(i) shall terminate upon termination of the Semiconductor Technology License Agreement between Intel Corporation and Rambus Inc.
(ii) If the Warrant has by its terms become exercisable, then if and for so long as Intel Corporation holds at least 500,000 shares of the Company's outstanding Common Stock (as adjusted for stock splits, stock dividends, stock combinations and the like), Intel Corporation shall have the option, subject to the conditions described below, to nominate a representative to the Board. Should Intel exercise this option in writing, the Company shall include such nominee among management's slate of nominees to the shareholders at the first annual meeting of shareholders taking place more than 90 days following satisfaction of the conditions set forth in this Section 6(d) and shall solicit shareholder votes in favor of the election of such nominee to the same extent that it solicits shareholder notes in favor of management's other nominees. The right to nominate a Board representative pursuant to this Section 6(d)(ii) shall not be effective prior to the effective time of the Company's initial public offering of shares of Common Stock under a Registration Statement (other than either a public offering limited solely to employees of the Company or an offering pursuant to Rule 145 under the Securities Act.)
(iii) Any designee under Section 6(d)(i) or nominee under Section 6(d)(ii) must be acceptable to the Board. The right to maintain such designee or nominee shall exist during a calendar quarter only if more than twenty percent (20%) of the main memory chip sets shipped by Intel Corporation during each of the two immediately preceding calendar quarters implemented the Rambus-1 Interface Specification or the Rambus-2 Interface Specification. Any such nominee shall resign from the Board on the first day of any calendar quarter with respect to which such condition is not satisfied. If such condition shall fail to be satisfied, and then later become satisfied, Intel may re-appoint a designee or nominee in accordance with the provisions of this Section 6(d).
(iv) The Intel Corporation designee or nominee shall receive notices and minutes of each meeting, and materials distributed to members of the Board in their capacities as such. Before any attendance at Board meetings is allowed, the Company may require such designee or nominee to execute a confidentiality and non-disclosure agreement in a form mutually acceptable to the Company and such
designee or nominee. Such designee or nominee may only disclose or use information made known to such person by virtue of the notice, minutes, or materials provided or attendance allowed hereunder to the extent consistent with the fiduciary duties of a director of the Company, whether or not such person actually is a director. Notwithstanding the foregoing, if the Board makes a good faith determination that it would be inappropriate to allow such designee or nominee to attend all or a portion of a Board meeting or to provide such designee or nominee with minutes or materials, for reasons relating to attorney- client privilege, securities law compliance, transactions or potential transactions between the Company and Intel Corporation or any affiliate or competitor thereof, or if, in the reasonable good faith judgment of the Board of Directors such attendance would be harmful to the Company, then the Company shall so indicate in the notice of such meeting to such designee or nominee, setting forth the basis of its decision to exclude such person, and shall not be obligated to allow such attendance or to provide such minutes or materials. The rights of Intel Corporation under this Section 6(d) shall be nonassignable. Subject to the conditions in this Section 6(d), Intel Corporation shall have the right to designate from time to time a replacement designee or nominee.
7. Right of First Refusal.
7.1 Right of First Refusal.
The Company hereby grants to each holder of at least 5% of the outstanding shares (which may be computed on an aggregate basis with affiliates of the holder) of any series of Preferred Stock, and to Intel Corporation, (a "Qualified Purchaser") a right of first refusal (the "Right of First Refusal") to purchase its Pro Rata Share of New Securities that the Company may from time to time issue.
7.2 Pro Rata Share.
For purposes of this Right of First Refusal, a Qualified Purchaser's "Pro Rata Share" shall mean the ratio that (i) the number of shares of Common Stock issuable upon conversion of the Preferred Stock then held by such Qualified Purchaser (or in the case of Intel Corporation, the number of shares of outstanding Common Stock issued to Intel Corporation upon exercise of the Common Stock Purchase Warrant No. 1 dated November 15, 1996 (the "Warrant")) bears to (ii) the sum of the number of shares of Common Stock then outstanding and the number of shares of Common Stock issuable upon conversion of all shares of Preferred Stock then outstanding. The Company may be required to allow the purchase of such Pro Rata Share upon a later exercise of the Warrant, and shall reserve such number of New Securities as may be necessary to satisfy its obligations under the Warrant.
7.3 New Securities.
Except as set forth below, "New Securities" shall mean any shares of capital stock of the company, and options, warrants and other rights to acquire capital stock of the Company issued after the date of this Agreement. Notwithstanding the foregoing, "New Securities" shall not include (i) the 1,882,353 shares of Series D Preferred Stock, (ii) Common Stock issuable upon conversion or exercise of securities outstanding as of the date of this Agreement, (iii) securities offered in a public offering registered under the Securities Act, (iv) securities issued pursuant to the acquisition of another corporation or other business entity by the Company by merger, purchase of all or substantially all of the assets or other reorganization whereby the Company or its shareholders own more than 50% of the voting power of the surviving entity in such
transaction, (v) shares of Common Stock or related options to purchase an
aggregate, net of returns to the option plan, or not more than 6,000,000 shares
of Common Stock issued or granted to employees, consultants, advisors, officers
or directors of the Company and its subsidiaries (including shares issued or
sold pursuant to the exercise of any stock option or purchase pursuant to a
grant under the Company's stock option plan or stock purchase plan, even though
granted prior to the date of this Agreement), (vi) securities issued pursuant to
any rights, including without limitation convertible securities, to receive
securities, provided that the right of first refusal created hereby applied with
respect to the initial sale or grant by the Company of such rights (and the
procedure set forth in Section 7.4 below was complied with by the Company, or
waived by all of the holders of Preferred Stock that did not exercise their
Right of First Refusal, with respect thereto), (vii) shares of Common Stock or
Preferred Stock issued in connection with any stock split, stock dividend, or
recapitalization by the Company, and (viii) securities issued pursuant to any
transactions involving technology licensing or a strategic relationship or
corporate partnering arrangement approved by the Company's Board of Directors.
Notwithstanding the foregoing or anything to the contrary in Section 5(a),
solely for the purpose of determining the rights of Intel Corporation under this
Section 7, Intel shall have a Right of First Refusal to purchase its Pro Rata
Share of securities offered for the account of the Company pursuant to the
initial public offering of the Company under a registration statement filed
under the Securities Act, where the aggregate offering price to the public of
securities so offered for the account of the Company equals or exceeds $50
million.
7.4 Procedure.
In the event that the Company proposes to undertake an issuance of New Securities, it shall give each Qualified Purchaser written notice of its intention, describing the amount and type of New Securities and the price and general terms upon which the Company proposes to issue such New Securities. Each Qualified Purchaser shall have ten (10) days from the date of receipt of such notice to agree to purchase up to its Pro Rata Share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. The Company may then, within ninety (90) days of the date of its notice to Qualified Purchasers, complete the proposed offering of New Securities on terms substantially as described in its notice to Qualified Purchasers, and each Qualified Purchaser shall purchase in such offering that number of New Securities that it indicated its intention to purchase in its written notice to the Company. The Company must repeat the notice procedure described above with respect to any proposed offering of New Securities that is not completed within such ninety (90) day period or that is proposed to be completed on terms that are not substantially as described in the notice to Qualified Purchasers.
8. Demand Registration.
8.1 Request for Registration on Form Other Than Form S-3.
Subject to the terms of this Agreement, in the event that the Company shall receive from the Initiating Holders at any time after the earlier of (a) March 30, 1996 and (b) the Company's initial public offering of shares of Common Stock under a Registration Statement, a written request that the Company effect any Registration with respect to all or a part of the Registrable Securities on a Form other than Form S-3 for an offering of at least 20% of the then outstanding Registrable Securities (or any lesser percent if the reasonably anticipated aggregate offering price to the public would exceed $7,500,000), the Company shall (i) promptly give written notice of the proposed Registration to all other Holders and shall (ii) as soon as
practicable, use its best efforts to effect Registration of the Registrable Securities specified in such request, together with any Registrable Securities of any Holder joining in such request as are specified in a written request given within 20 days after written notice from the Company. The Company shall not be obligated to take any action to effect any such registration pursuant to this Section 8.1 (i) within six months of the effective date of a Registration initiated by the Company or (ii) after the Company has effected two such Registrations pursuant to this Section 8.1 and such Registrations have been declared effective.
8.2 Right of Deferral of Registration.
If the Company shall furnish to all such Holders who joined in a request pursuant to Section 8.1 or 8.3 a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for any Registration to be effected as requested under Section 8.1 or 8.3, as applicable, the Company shall have the right, exercisable one time only with respect to such request, to defer the filing of a Registration Statement with respect to such offering for a period of not more than 90 days from delivery of the request of the Initiating Holders.
8.3 Request for Registration on Form S-3.
Subject to the terms of this Agreement, in the event that the
Company receives from any Holders of the then outstanding Registrable Securities
a written request that the Company effect any Registration on Form S-3 (or any
successor form to Form S-3 regardless of its designation) at a time when the
Company is eligible to register securities on Form S-3 (or any successor form to
Form S-3 regardless of its designation) for an offering of Registrable
Securities, the Company will promptly give written notice of the proposed
Registration to all the Holders and will as soon as practicable use its best
efforts to effect Registration of the Registrable Securities specified in such
request, together with all or such portion of the Registrable Securities of any
Holder joining in such request as are specified in a written request delivered
to the Company within 30 days after written notice from the Company of the
proposed Registration. There shall be no limit to the number of occasions on
which the Company shall be obligated to effect Registration under this Section
8.3. The Company shall not be obligated to take any action to affect
Registration under this Section 8.3 (i) within six months following any other
registered public offering, including any prior registered offering on Form S-3,
or (ii) if the number of shares which Holders have requested be included in such
Registration would result in an anticipated aggregate offering price of less
than $5,000,000.
8.4 Registration of Other Securities in Demand Registration.
Any Registration Statement filed pursuant to the request of the
Initiating Holders under this Section 8 may, subject to the provisions of
Section 8.5, include securities of the Company other than Registrable
Securities.
8.5 Underwriting in Demand Registration.
8.5.1 Notice of Underwriting.
If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 8, and the Company shall include such information in the written notice referred to in Section 8.1 or 8.3. The right of any Holder to Registration pursuant to Section 8 shall be conditioned upon such Holder's agreement to participate in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting.
8.5.2 Inclusion of Other Holders in Demand Registration.
If the Company or holders of securities other than
Registrable Securities request inclusion in such Registration, the Initiating
Holders, to the extent they deem advisable and consistent with the goals of such
Registration, shall, on behalf of all Holders, offer to any or all of the
Company and such holders of securities other than Registrable Securities that
such securities other than Registrable Securities be included in the
underwriting and may condition such offer on the acceptance by such persons of
the terms of this Section 8. In the event, however, that the number of shares so
included exceeds the number of shares of Registrable Securities included by all
Holders, such Registration shall be treated as governed by Section 9 hereof
rather than Section 8, and it shall not count as a Registration for purposes of
Section 8.1 hereof.
8.5.3 Selection of Underwriter in Demand Registration.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement with the representative ("Underwriter's Representative")
of the underwriter or underwriters selected for such underwriting by the Holders
of a majority of the Registrable Securities being registered (provided that only
those Holders responding positively within the period required by Section 8.1 or
Section 8.3, as applicable, shall be included in such calculation) and agreed to
by the Company.
8.5.4 Marketing Limitation in Demand Registration.
In the event the Underwriter's Representative advises the Initiating Holders in writing that market factors (including, without limitation, the aggregate number of shares of Common Stock requested to be Registered, the general condition of the market, and the status of the persons proposing to sell securities pursuant to the Registration) require a limitation of the number of shares to be underwritten, then (i) first the Common Stock (other than Registrable Securities) held by officers or directors of the Company, (ii) next the securities other than Registrable Securities, and (iii) last the securities requested to be registered by the Company, shall be excluded from such Registration to the extent required by such limitation. If a limitation of the number of shares is still required, the Initiating Holders shall so advise all Holders and the number of shares of Registrable Securities that may be included in the Registration and underwriting shall be allocated among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities entitled to inclusion in such Registration held by such Holders at the time of filing the Registration Statement. No Registrable Securities or other securities excluded from the underwriting by reason of this Section 8.5.4 shall be included in such Registration Statement.
8.5.5 Right of Withdrawal in Demand Registration.
If any Holder of Registrable Securities, or a holder of other securities entitled (upon request) to be included in such Registration, disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the underwriter and the Initiating Holders
delivered at least seven days prior to the effective date of the Registration Statement. The securities so withdrawn shall also be withdrawn from the Registration Statement.
8.6 Blue Sky in Demand Registration.
In the event of any Registration pursuant to Section 8, the Company will exercise its best efforts to Register and qualify the securities covered by the Registration Statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of such securities; provided, however, that (i) the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, and (ii) notwithstanding anything in this Agreement to the contrary, in the event any jurisdiction in which the securities shall be qualified imposes a non-waivable requirement that expenses incurred in connection with the qualification of the securities be borne by selling shareholders, such expenses shall be payable pro rata by selling shareholders.
9. Piggyback Registration.
9.1 Notice of Piggyback Registration and Inclusion of Registrable Securities.
Subject to the terms of this Agreement, in the event the Company decides to Register any of its Common Stock for its own account on a form that would be suitable for a registration involving solely Registrable Securities, the Company will: (i) promptly give each Holder written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable Blue Sky or other state securities laws) and (ii) include in such Registration (and any related qualification under Blue Sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request delivered to the Company by any Holder within 15 days after delivery of such written notice from the Company.
9.2 Underwriting in Piggyback Registration.
9.2.1 Notice of Underwriting in Piggyback Registration.
If the Registration of which the Company gives notice is
for a Registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
9.1. In such event the right of any Holder to Registration shall be conditioned
upon such underwriting and the inclusion of such Holder's Registrable Securities
in such underwriting to the extent provided in this Section 9. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement with the
Underwriter's Representative for such offering. The Holders shall have no right
to participate in the selection of the underwriters for an offering pursuant to
this Section 9.
9.2.2 Marketing Limitation in Piggyback Registration.
In the event the Underwriter's Representative advises the Holders seeking registration of Registrable Securities pursuant to Section 9 in writing that market factors (including, without limitation, the aggregate number of shares of Common Stock requested to be Registered, the general condition of the market, and the status of the persons proposing to sell securities pursuant to the Registration) require a
limitation of the number of shares to be underwritten, the Underwriter's Representative (subject to the allocation priority set forth in Section 9.2.3) may:
(a) in the case of the Company's initial Registered public offering, exclude some or all Registrable Securities from such registration and underwriting;
(b) in the case of the first Registered public offering subsequent to the initial public offering, limit the number of shares of Registrable Securities to be included in such Registration and underwriting to not less than twenty percent (20%) of the securities included in such Registration (based on aggregate market values); and
(c) in the case of any subsequent registered public offering, limit the number of shares of Registrable Securities to be included in such Registration and underwriting to not less than twenty-five percent (25%) of the securities included in such Registration (based on aggregate market values).
9.2.3 Allocation of Shares in Piggyback Registration.
In the event that the Underwriter's Representative limits the number of shares to be included in a Registration pursuant to Section 9.2.2, the number of shares to be included in such Registration shall be allocated (subject to Section 9.2.2) in the following manner: The shares (other than Registrable Securities) held by officers or directors of the Company shall be excluded from such Registration and underwriting to the extent required by such limitation. Next, the shares (other than Registrable Securities) held by other holders of the Company's securities shall be excluded from such Registration and underwriting to the extent required by such limitation. If a limitation of the number of shares is still required after such exclusion, the number of shares that may be included in the Registration and underwriting shall be allocated among all Holders thereof requesting and legally entitled to include shares in such Registration, in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which such Holders would otherwise be entitled to include in such Registration. No Registrable Securities or other securities excluded from the underwriting by reason of this Section 9.2.3 shall be included in the Registration Statement.
9.2.4 Withdrawal in Piggyback Registration.
If any Holder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the underwriter delivered at least seven days prior to the effective date of the Registration Statement. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such Registration.
9.3 Blue Sky in Piggyback Registration.
In the event of any Registration of Registrable Securities pursuant to Section 9, the Company will exercise its best efforts to Register and qualify the securities covered by the Registration Statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of such securities; provided, however, that (i) the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, and (ii) notwithstanding anything in this Agreement to the contrary, in the event any jurisdiction in which the securities shall be qualified imposes a non-waivable requirement that expenses incurred in connection with the
qualification of the securities be borne by selling shareholders, such expenses shall be payable pro rata by selling shareholders.
10. Expenses of Registration.
All Registration Expenses incurred in connection with two Registrations pursuant to Section 8 and all Registrations pursuant to Section 9, shall be borne by the Company. All Registration Expenses incurred in connection with any other registration, qualification or compliance shall be apportioned among the Holders and other holders of the securities so registered on the basis of the number of shares so registered. Notwithstanding the above, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 8 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (which Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 8; provided further, however, that if at the time of such withdrawal, the Holders have learned of a Material Adverse Event with respect to the condition, business or prospects of the Company not known to the Holders at the time of their request, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 8. All Selling Expenses shall be borne by the holders of the securities registered pro rata on the basis of the number of shares registered.
11. Registration Procedures.
The Company will keep each Holder whose Registrable Securities are
included in any registration pursuant to this Agreement advised as to the
initiation and completion of such Registration. At its expense the Company will:
(a) use its best efforts to keep such Registration effective for a period of 120
days or until the Holder or Holders have completed the distribution described in
the Registration Statement relating thereto, whichever first occurs; and (b)
furnish such number of prospectuses (including preliminary prospectuses) and
other documents as a Holder from time to time may reasonably request.
12. Information Furnished by Holder.
It shall be a condition precedent of the Company's obligations under this Agreement that each Holder of Registrable Securities included in any Registration furnish to the Company such information regarding such Holder and the distribution proposed by such Holder or Holders as the Company may reasonably request.
13. Indemnification.
13.1 Company's Indemnification of Holders.
To the extent permitted by law, the Company will indemnify each Holder, each of its officers, directors and constituent partners, legal counsel for the Holders, and each person controlling such Holder, with respect to which Registration, qualification or compliance of Registrable Securities has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter against all claims, losses, damages or liabilities (or actions in respect thereof) to the extent such claims, losses, damages or liabilities arise out of or are based upon any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus or other document (including any related Registration
Statement) incident to any such Registration, qualification or compliance, or
are based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
Registration, qualification or compliance; and the Company will reimburse each
such Holder, each such underwriter and each person who controls any such Holder
or underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
Section 13.1 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Company (which consent shall not unreasonably be withheld); and provided,
further, that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based
upon any untrue statement or omission based upon written information furnished
to the Company by such Holder, underwriter, or controlling person and stated to
be for use in connection with the offering of securities of the Company.
13.2 Holder's Indemnification of Company.
To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
Registration, qualification or compliance is being effected pursuant to this
Agreement, indemnify the Company, each of its directors and officers, each legal
counsel and independent accountant of the Company, each underwriter, if any, of
the Company's securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of the
Securities Act, and each other such Holder, each of its officers, directors and
constituent partners and each person controlling such other Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Holder of any rule
or regulation promulgated under the Securities Act applicable to such Holder and
relating to action or inaction required of such Holder in connection with any
such Registration, qualification or compliance; and will reimburse the Company,
such Holders, such directors, officers, partners, persons, law and accounting
firms, underwriters or control persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration Statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use in connection with the offering of securities
of the Company. Notwithstanding the foregoing, a Holder's liability under this
Section 13.2 shall not exceed such Holder's proceeds from the offering of
securities made in connection with such Registration, and the indemnity
contained in this Section 13.2 shall not apply to amounts paid in settlement of
any claim, loss, damage, liability or action if settlement is effected without
the consent of such Holder (which consent shall not unreasonably be withheld).
13.3 Indemnification Procedure.
Promptly after receipt by an indemnified party under this
Section 13 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against
an indemnifying party under this Section 13, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim; provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of such claim with the approval of
any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided further, however, that if either party
reasonably determines that there may be a conflict between the position of the
Company and the Investors in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity under this Section 13,
then counsel for such party shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party,
to the extent so prejudiced, of any liability to the indemnified party under
this Section 13, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise than under this Section 13. The indemnity provided for in this
Section 13 shall apply to the Holders in their capacities as such, and shall be
independent of any other agreement, including without limitation an underwriting
agreement, entered into after the date hereof between the Company and any Holder
in its capacity as a Holder or otherwise.
14. Limitations on Registration Rights Granted to Other Securities.
From and after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company providing for the granting to such holder of any information or Registration rights, except that, with the consent of the Holders of 66-2/3% of the aggregate of the Convertible Securities and Registrable Securities then outstanding, additional holders may be added as parties to this Agreement with regard to any or all securities of the Company held by them. Any such additional parties shall execute a counterpart of this Agreement, and upon execution by such additional parties and by the Company, shall be considered an Investor for all purposes of this Agreement. The additional parties and the additional Registrable Securities shall be identified in an amendment to Schedule A hereto.
15. Transfer of Rights.
The rights to information under Sections 2, 3, 4 and 5, and the right to cause the Company to Register securities granted by the Company to the Investors under this Agreement may be assigned by any Holder to a transferee or assignee of any Convertible Securities or Registrable Securities not sold to the public acquiring at least 235,000 shares of such Holder's Registrable Securities (equitably adjusted for any stock splits, subdivisions, stock dividends, changes, combinations or the like); provided, however, that (i) the Company must receive written notice prior to the time of said transfer, stating the name and address of said transferee or assignee and identifying the securities with respect to which such information and Registration rights are being assigned, and (ii) the transferee or assignee of such rights must not be a person deemed by the Board of Directors of the Company, in its best judgment, to be a competitor or potential competitor of the Company. Notwithstanding the limitation set forth in the foregoing sentence respecting the minimum number of shares which must be transferred, (a) any Holder which is a partnership may transfer such Holder's Registration rights to such Holder's constituent partners without restriction as to the number or percentage of shares acquired by any such constituent partner and (b) GS Capital Partners, L.P. may transfer its Registration rights to hereunder to Stone Street Fund 1994, L.P., Stone Street Fund 1995, L.P., Bridge Street Fund 1994, L.P., and Bridge Street Fund 1995, L.P. (the "GS Transferees") without restriction as to the number or
percentage of shares acquired by any such transferee. Any transferee or assignee to which rights are transferred under this Agreement shall be subject to the restrictions and obligations imposed upon Holders by this Agreement.
16. Market Stand-off.
Each Holder hereby agrees that, if so requested by the Company and the Underwriter's Representative (if any), such Holder shall not sell or otherwise transfer any Registrable Securities or other securities of the Company during the 120 day period (the "Market Standoff Period") following the effective date of a Registration Statement of the Company filed under the Securities Act; provided, however, that if in connection with the offering of the securities so Registered, the Holders of a majority of the Registrable Securities agree not to sell or otherwise transfer any shares held by them for a period greater than 120 days, then the Market Standoff Period shall be increased to such greater period agreed to by such Holders; and provided, further, that such restriction shall only apply to the first two Registration Statements of the Company to become effective which include securities to be sold on behalf of the Company to the public in an underwritten offering.
17. Conversion of Preferred Stock.
The Registration rights of the Holders of the Shares set forth in this Agreement are conditioned upon the conversion of the Shares with respect to which registration is sought into Common Stock prior to the effective date of the Registration Statement; provided however, that in the event the closing of the public offering to which such Registration Statement relates does not occur within six (6) business days following the effective date, such conversion shall be deemed not to have occurred.
18. Miscellaneous.
18.1 Termination of Prior Agreements, Rights and Obligations.
Upon execution of this Agreement by the Company, the Investors and the Holders of at least sixty six and two-thirds percent (66-2/3%) of the then-outstanding Registrable Securities, as defined in the Prior Registration Agreement, pursuant to Section 18.7 thereof, the Prior Registration Agreement and all rights and obligations contained therein shall be amended and superseded in their entirety by this Agreement and the rights and obligations contained herein.
18.2 Entire Agreement; Successors and Assigns.
This Agreement constitutes the entire contract between the Company and the Investors relative to the subject matter hereof. Any previous agreement between the Company and the Investors concerning Registration rights is superseded by this Agreement. Subject to the exceptions specifically set forth in this Agreement the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties.
18.3 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents.
18.4 Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
18.5 Headings.
The headings of the Sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement.
18.6 Notices.
Any notice required or permitted hereunder shall be given in writing and shall be conclusively deemed effectively given upon personal delivery, or five days after deposit in the United States mail, by registered or certified mail, postage prepaid, addressed (i) if to the Company, as set forth below the Company's name on the signature page of this Agreement, and (ii) if to an Investor, at such Investor's address as set forth on Schedule A, or at such other address as the Company or such Investor may designate by ten (10) days' advance written notice to the Investors or the Company, respectively.
18.7 Amendment of Agreement.
Any provision of this Agreement may be amended only by a
written instrument signed by the Company and by persons holding at least sixty
six and two-thirds percent (66-2/3%) of the Registrable Securities as defined in
Section 1 of this Agreement; provided that any amendment to Section 6 shall
require the consent of the Investor or transferee whose rights thereunder are
being amended; and provided, further, that any amendment adversely affecting an
Investor or transferee in a different manner than all Investors or transferees
generally shall require the consent of the Investor or transferee so affected.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
The Company: RAMBUS, INC.
By: _______________________________
Title:_____________________________
The Investors: MOHR, DAVIDOW VENTURES II
By:________________________________
Title:_____________________________
KLEINER PERKINS CAUFIELD & BYERS V
By:________________________________
Title:_____________________________
MERRILL, PICKARD, ANDERSON & EYRE V
By:________________________________
Title:_____________________________
INTEGRAL CAPITAL PARTNERS
By:________________________________
Title:_____________________________
DOMINION INCOME MANAGEMENT
By:________________________________
Title:_____________________________
GS CAPITAL PARTNERS, L.P.
By:________________________________
Title:_____________________________
MICHAEL DELL
By:________________________________
INTEL CORPORATION
By:________________________________
Title:_____________________________
|
EXHIBIT 4.3
RAMBUS INC.
AND
[RIGHTS AGENT]
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF MARCH 21, 1997
TABLE OF CONTENTS
PAGE
------
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 7
Section 3. Issuance of Rights Certificates 7
Section 4. Form of Rights Certificates 9
Section 5. Countersignature and Registration 10
Section 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates 10
Section 7. Exercise of Rights; Exercise Price; Expiration
Date of Rights 11
Section 8. Cancellation and Destruction of Rights Certificates 13
Section 9. Reservation and Availability of Preferred Shares 13
Section 10. Record Date 14
Section 11. Adjustment of Exercise Price, Number of Shares or
Number of Rights 15
Section 12. Certificate of Adjusted Exercise Price or Number
of Shares 21
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power 21
Section 14. Fractional Rights and Fractional Shares 25
Section 15. Rights of Action 26
Section 16. Agreement of Rights Holders 26
Section 17. Rights Certificate Holder Not Deemed a Stockholder 27
Section 18. Concerning the Rights Agent 27
Section 19. Merger or Consolidation or Change of Name of
Rights Agent 28
Section 20. Duties of Rights Agent 28
|
TABLE OF CONTENTS
(CONTINUED)
PAGE
------
Section 21. Change of Rights Agent 30
Section 22. Issuance of New Rights Certificates 31
Section 23. Redemption 31
Section 24. Exchange 32
Section 25. Notice of Certain Events 34
Section 26. Notices 34
Section 27. Supplements and Amendments 35
Section 28. Successors 35
Section 29. Determinations and Actions by the Board of
Directors, etc. 35
Section 30. Benefits of this Agreement 36
Section 31. Severability 36
Section 32. Governing Law 36
Section 33. Counterparts 36
Section 34. Descriptive Headings 36
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
|
RIGHTS AGREEMENT
Agreement, dated as of March 21, 1997, between Rambus Inc., a Delaware corporation, and [RIGHTS AGENT].
On February 28, 1997 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board of Directors of the Company authorized and declared a dividend of one Preferred Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter defined) of the Company outstanding as of the Close of Business (as hereinafter defined) on April 1, 1997 (the "RECORD DATE"), each Right representing the right to purchase one one-thousandth of a share of Series A Participating Preferred Stock (as such number may be adjusted pursuant to the provisions of this Agreement), having the rights, preferences and privileges set forth in the form of Certificate of Designations of Rights, Preferences and Privileges of Series A Participating Preferred Stock attached hereto as Exhibit A, upon the terms and subject to the conditions herein set forth, and further authorized and directed the issuance of one Right (as such number may be adjusted pursuant to the provisions of this Agreement) with respect to each Common Share that shall become outstanding between the Record Date and the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined), and in certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall not include the Company, any Subsidiary of the Company or any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring Person as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Shares in Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), then such Person shall be deemed to be an Acquiring Person unless upon becoming the Beneficial Owner of such additional Common Shares of the Company such Person does not beneficially own 15% or more of the Common Shares of the Company then outstanding.
Notwithstanding the foregoing, (i) if a majority of the Continuing Directors
then in office determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
the Common Shares that would otherwise cause such Person to be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
or (B) such Person was aware of the extent of the Common Shares it beneficially
owned but had no actual knowledge of the consequences of such beneficial
ownership under this Agreement) and without any intention of changing or
influencing control of the Company, and if such Person divested or divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this Agreement; and
(ii) if, as of the date hereof, any Person is the Beneficial Owner of 15% or
more of the Common Shares outstanding, such Person shall not be or become an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), unless and until such time as such Person shall become the
Beneficial Owner of additional Common Shares (other than pursuant to a dividend
or distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), unless, upon becoming the Beneficial Owner of such additional Common
Shares, such Person is not then the Beneficial Owner of 15% or more of the
Common Shares then outstanding.
(b) "ADJUSTMENT FRACTION" shall have the meaning set forth in Section 11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall be deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed pursuant to this Section 1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or (2) securities which a Person or any of such Person's Affiliates or Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the Company and such Person (or one
or more of its Affiliates or Associates) if such agreement has been approved by
the Board of Directors of the Company prior to there being an Acquiring Person;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this Section
1(d)(ii)(B) if the agreement, arrangement or understanding to vote such security
(1) arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or disposing of any securities of the Company; provided, however, that in no case shall an officer or director of the Company be deemed (x) the Beneficial Owner of any securities beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Company or (y) the Beneficial Owner of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan.
(e) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York are authorized or obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M., New York time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) "COMMON SHARES" when used with reference to the Company shall mean the shares of Common Stock of the Company, $0.001 par value. Common Shares when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
(h) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in Section 11(a)(iii) hereof.
(i) "COMPANY" shall mean Rambus Inc., a Delaware corporation, subject to the terms of Section 13(a)(iii)(C) hereof.
(j) "CONTINUING DIRECTOR" shall mean (i) any member of the Board of Directors of the Company who, while a member of the Board, is not an Acquiring Person, or an Affiliate or Associate
of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and who was a member of the Board prior to there being an Acquiring Person, and (ii) any Person who subsequently becomes a member of the Board and who, while a member of the Board, is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors.
(k) "CURRENT PER SHARE MARKET PRICE" of any security (a "Security" for purposes of this definition), for all computations other than those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price of any Security on any date shall be deemed to be the average of the daily closing prices per share of such Security for the ten (10) consecutive Trading Days immediately prior to such date; provided, however, that in the event that the Current Per Share Market Price of the Security is determined during a period following the announcement by the issuer of such Security of (i) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (ii) any subdivision, combination or reclassification of such Security, and prior to the expiration of the applicable thirty (30) Trading Day or ten (10) Trading Day period, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last sale price or, if such last sale price is not reported, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Security, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. If the Preferred Shares are not publicly traded, the Current Per Share Market Price of the Preferred Shares shall be conclusively deemed to be the Current Per Share Market Price of the Common Shares as determined pursuant to this Section 1(k), as appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof, multiplied by 1000. If the Security is not publicly held or so listed or traded, Current Per Share Market Price shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
(l) "CURRENT VALUE" shall have the meaning set forth in Section 11(a)(iii) hereof.
(m) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close of Business on the tenth day (or such later date as may be determined by action of a majority of Continuing Directors then in office) after the Shares Acquisition Date (or, if the tenth day after the Shares Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) or (ii) the Close of Business on the tenth Business Day (or such later date as may be determined by action of a majority of Continuing Directors then in office) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if, assuming the successful consummation thereof, such Person would be an Acquiring Person.
(n) "EQUIVALENT SHARES" shall mean Preferred Shares and any other class or series of capital stock of the Company which is entitled to the same rights, privileges and preferences as the Preferred Shares.
(o) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
(p) "EXCHANGE RATIO" shall have the meaning set forth in Section 24(a) hereof.
(q) "EXERCISE PRICE" shall have the meaning set forth in Section 4(a) hereof.
(r) "EXPIRATION DATE" shall mean the earliest to occur of: (i) the Close of Business on the Final Expiration Date, (ii) the Redemption Date, (iii) consummation of any transaction con templated by Section 13(f) hereof, or (iv) the time at which the Board of Directors orders the exchange of the Rights as provided in Section 24 hereof.
(s) "FINAL EXPIRATION DATE" shall mean March 21, 2007.
(t) "NASDAQ" shall mean the National Association of Securities Dealers, Inc. Automated Quotations System.
(u) "PERMITTED OFFER" shall mean a tender offer for all outstanding Common Shares made in the manner prescribed by Section 14(d) of the Exchange Act and the rules and regulations promulgated thereunder; provided, however, that such tender offer occurs at a time when Continuing Directors are in office and a majority of the Continuing Directors then in office has determined that the offer is both fair and otherwise in the best interests of the Company and its stockholders (taking into account all factors that such Continuing Directors deem relevant).
(v) "PERSON" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.
(w) "POST-EVENT TRANSFEREE" shall have the meaning set forth in Section 7(e) hereof.
(x) "PREFERRED SHARES" shall mean shares of Series A Participating Preferred Stock, $0.001 par value, of the Company.
(y) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in Section 7(e) hereof.
(z) "PRINCIPAL PARTY" shall have the meaning set forth in Section 13(b) hereof.
(aa) "RECORD DATE" shall have the meaning set forth in the recitals at the beginning of this Agreement.
(bb) "REDEMPTION DATE"shall have the meaning set forth in Section 23(a) hereof.
(cc) "REDEMPTION PRICE" shall have the meaning set forth in Section 23(a) hereof.
(dd) "RIGHTS AGENT" shall mean [INSERT NAME OF AGENT] or its successor or replacement as provided in Sections 19 and 21 hereof.
(ee) "RIGHTS CERTIFICATE" shall mean a certificate substantially in the form attached hereto as Exhibit B.
(ff) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning set forth in the recitals at the beginning of this Agreement.
(gg) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(hh) "SECTION 13 EVENT" shall mean any event described in clause (i), (ii) or (iii) of Section 13(a) hereof.
(ii) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(jj) "SHARES ACQUISITION DATE" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such; provided that, if such Person is determined not to have become an Acquiring Person pursuant to Section 1(a) hereof, then no Shares Acquisition Date shall be deemed to have occurred.
(kk) "SPREAD" shall have the meaning set forth in Section 11(a)(iii) hereof.
(ll) "SUBSIDIARY" of any Person shall mean any corporation or other entity of which an amount of voting securities sufficient to elect a majority of the directors or Persons having similar authority of such corporation or other entity is beneficially owned, directly or indirectly, by such Person, or any corporation or other entity otherwise controlled by such Person.
(mm) "SUBSTITUTION PERIOD" shall have the meaning set forth in Section 11(a)(iii) hereof.
(nn) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement substantially in the form attached hereto as Exhibit C.
(oo) "TOTAL EXERCISE PRICE" shall have the meaning set forth in Section 4(a) hereof.
(pp) "TRADING DAY" shall mean a day on which the principal national securities exchange on which a referenced security is listed or admitted to trading is open for the transaction of business or, if a referenced security is not listed or admitted to trading on any national securities exchange, a Business Day.
(qq) A "TRIGGERING EVENT" shall be deemed to have occurred upon any Person, becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Rights Certificates) and not by separate Rights Certificates and (ii) the right to receive Rights Certificates will be transferable only in connection with the transfer of Common Shares. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of certificates for Common Shares shall also constitute the surrender for transfer of the Rights associated with the Common Shares represented thereby. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Rights Certificate evidencing one Right for each Common Share so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per Common Share has been made pursuant to Section 11 hereof, then at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of the Distribution Date, the Rights will be evidenced solely by such Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of Common Shares, and the holders of such Rights Certificates as listed in the records of the Company or any transfer agent or registrar for the Rights shall be the record holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the Company will send a copy of the Summary of Rights by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company's transfer agent and registrar. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with the Summary of Rights. Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.
(c) Unless the Board of Directors by resolution adopted at or before the time of the issuance of any Common Shares specifies to the contrary, Rights shall be issued in respect of all Common Shares that are issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date or, in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates representing such Common Shares shall also be deemed to be certificates for Rights, and shall bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN RAMBUS INC. AND [RIGHTS AGENT], AS THE RIGHTS AGENT, DATED AS OF MARCH 21, 1997, (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF RAMBUS INC.. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. RAMBUS INC. WILL MAIL TO THE HOLDER OF THIS CERTIFI CATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUM STANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall
be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase Common Shares and of assignment to be printed on the reverse thereof) shall be substantially in the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or a national market system, on which the Rights may from time to time be listed or included, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distri buted, shall be dated as of the Record Date (or in the case of Rights issued with respect to Common Shares issued by the Company after the Record Date, as of the date of issuance of such Common Shares) and on their face shall entitle the holders thereof to purchase such number of one- thousandths of a Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a Preferred Share being hereinafter referred to as the "EXERCISE PRICE" and the aggregate Exercise Price of all Preferred Shares issuable upon exercise of one Right being hereinafter referred to as the "TOTAL EXERCISE PRICE"), but the number and type of securities purchasable upon the exercise of each Right and the Exercise Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a)or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which a majority of the Continuing Directors then in office has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRE
SENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF THE RIGHTS AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its Chief Financial Officer, its President or any Vice President, either manually or by facsimile signature, and by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature, and shall have affixed thereto the Company's seal (if any) or a facsimile thereof. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates on behalf of the Company had not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certifi cate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purposes, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Rights Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver to the person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date and prior to the Close of Business on the Expiration Date by surrender of the Rights Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Exercise Price for each one-thousandth of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as to which the Rights are exercised.
(b) The Exercise Price for each one-thousandth of a Preferred Share issuable pursuant to the exercise of a Right shall initially be ONE HUNDRED TWENTY FIVE DOLLARS ($125.00), shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Exercise Price for the number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for the Preferred Shares) a certificate or certificates for the number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the total number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as are to be purchased (in which case certificates for the Preferred Shares (or, following a Triggering Event, other securities, cash or other assets as the case may be) represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) when appro priate, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Rights Certificate. The payment of the Exercise Price (as such amount may be reduced (including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, may be made in cash or by certified bank check, cashier's check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue securities of the Company other than Preferred Shares, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remain ing unexercised shall be issued by the Rights Agent to the registered holder of such Rights Certificate or to his or her duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such (a "POST-EVENT TRANSFEREE"), (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which a majority of the Continuing Directors then in office has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv) any subsequent transferee receiving transferred Rights from a Post-Event Transferee or a Pre- Event Transferee, either directly or through one or more intermediate transferees, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or to any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of such Acquiring Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall, in addition to having complied with the requirements of Section 7(a), have (i) completed and signed
the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will use its best efforts to cause to be reserved and kept available out of its authorized and unissued Preferred Shares not reserved for another purpose (and, following the occurrence of a Triggering Event, out of its authorized and unissued Common Shares and/or other securities), the number of Preferred Shares (and, following the occurrence of the Triggering Event, Common Shares and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares on a national securities exchange, then so long as the Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities) issuable and deliverable upon exercise of the Rights may be listed on such exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare
and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating, and notify the Rights Agent, that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notification to the Rights Agent at such time as the suspension is no longer in effect. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction, unless the requisite qualification in such jurisdiction shall have been obtained, or an exemption therefrom shall be available, and until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (or other securities of the Company) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Exercise Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or of any Preferred Shares (or other securities of the Company) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares (or other securities of the Company) in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares (or other securities of the Company) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due.
Section 10. Record Date. Each Person in whose name any certificate for a number of one-thousandths of a Preferred Share (or other securities of the Company) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of Preferred Shares (or other securities of the Company) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Total Exercise Price with respect to which the Rights have been exercised (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a holder of Preferred Shares (or other securities of the Company) for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights. The Exercise Price, the number and kind of shares or other property covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) (i) Anything in this Agreement to the contrary notwithstanding, in the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares (by reverse stock split or otherwise) into a smaller number of Preferred Shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in this Section 11 and Section 7(e) hereof: (1) the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price thereafter shall equal the result obtained by dividing the Exercise Price in effect immediately prior to such time by a fraction (the "ADJUSTMENT FRACTION"), the numerator of which shall be the total number of Preferred Shares (or shares of capital stock issued in such reclassification of the Preferred Shares) outstanding immediately following such time and the denominator of which shall be the total number of Preferred Shares outstanding immediately prior to such time; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of such Right; and (2) the number of one-thousandths of a Preferred Share (or share of such other capital stock) issuable upon the exercise of each Right shall equal the number of one-thousandths of a Preferred Share (or share of such other capital stock) as was issuable upon exercise of a Right immediately prior to the occurrence of the event described in clauses (A)-(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided, however, that, no such adjustment shall be made pursuant to this Section 11(a)(i) to the extent that there shall have simultaneously occurred an event described in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate adjustment being made thereunder. Each Common Share that shall become outstanding after an adjustment has been made pursuant to this Section 11(a)(i) shall have associated with it the number of Rights, exercisable at the Exercise Price and for the number of one-thousandths of a Preferred Share (or shares of such other capital stock) as one Common Share has associated with it immediately following the adjustment made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths of a Preferred Share, such number of Common Shares of
the Company as shall equal the result obtained by multiplying the Exercise Price
in effect immediately prior to the occurrence of the Triggering Event by the
number of one-thousandths of a Preferred Share for which a Right was exercisable
(or would have been exercisable if the Distribution Date had occurred)
immediately prior to the first occurrence of a Triggering Event, and dividing
that product by 50% of the Current Per Share Market Price for Common Shares on
the date of occurrence of the Triggering Event; provided, however, that the
Exercise Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject
to further adjustment as appropriate in accordance with Section 11(e) hereof to reflect any events occurring in respect of the Common Shares of the Company after the occurrence of the Triggering Event. Notwithstanding the foregoing provisions of this Section 11(a)(ii), the right to buy Common Shares of the Company pursuant to Section 11(a)(ii) hereof shall not arise as a result of any Person becoming an Acquiring Person through an acquisition of Common Shares pursuant to a Permitted Offer.
(iii) In lieu of issuing Common Shares in accordance with Section 11(a)(ii) hereof, the Company may, if a majority of the Continuing Directors then in office determines that such action is necessary or appropriate and not contrary to the interest of holders of Rights and, in the event that the number of Common Shares which are authorized by the Company's Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights, or if any necessary regulatory approval for such issuance has not been obtained by the Company, the Company shall: (A) determine the excess of (1) the value of the Common Shares issuable upon the exercise of a Right (the "CURRENT VALUE") over (2) the Exercise Price (such excess, the "SPREAD") and (B) with respect to each Right, make adequate provision to substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3) other equity securities of the Company (including, without limitation, shares or units of shares of any series of preferred stock which a majority of the Continuing Directors then in office has deemed to have the same value as Common Shares (such shares or units of shares of preferred stock are herein called "COMMON STOCK EQUIVALENTS")), except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (4) debt securities of the Company, except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by a majority of the Continuing Directors then in office based upon the advice of a nationally recognized investment banking firm selected by a majority of the Continuing Directors then in office; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Triggering Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "SECTION 11(a)(ii) TRIGGER DATE"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Exercise Price, Common Shares (to the extent available), except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If a majority of the Continuing Directors then in office shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights or that any necessary regulatory approval for such issuance will be obtained, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii)Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares or take action to obtain such regulatory approval (such period, as it may be extended, the "SUBSTITUTION PERIOD"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares, to take
any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspen sion is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the Current Per Share Market
Price of the Common Shares on the Section 11(a)(ii) Trigger Date and the value
of any Common Stock Equivalent shall be deemed to have the same value as the
Common Shares on such date.
(b) In case the Company shall, at any time after the date of this Agreement, fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling such holders (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Shares or Equivalent Shares or securities convertible into Preferred Shares or Equivalent Shares at a price per share (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Shares) less than the then Current Per Share Market Price of the Preferred Shares or Equivalent Shares on such record date, then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of Preferred Shares or Equivalent Shares, as the case may be, which the aggregate offering price of the total number of Preferred Shares or Equivalent Shares, as the case may be, to be offered or issued (and/or the aggregate initial conversion price of the convertible securities to be offered or issued) would purchase at such current market price, and the denominator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of additional Preferred Shares or Equivalent Shares, as the case may be, to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by a majority of the Continuing Directors then in office, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Preferred Shares and Equivalent Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this Agreement, fix a record date for the making of a distribution to all holders of the Preferred Shares or of any class or series of Equivalent Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend, if any, or a dividend payable in Preferred Shares) or subscription rights, options or warrants (excluding those referred to in Section 11(b)), then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Per Share Market Price of a Preferred Share or an Equivalent Share on such record date, less the fair market value per Preferred Share or Equivalent Share (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Preferred Share or Equivalent Share, as the case may be, and the denominator of which shall be such Current Per Share Market Price of a Preferred Share or Equivalent Share on such record date; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price which would have been in effect if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided, however, that any adjustments which by reason of this Section 11(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a Common Share or other share or one hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the first sentence of this Section 11(d), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11(a) or
13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and, if required, the Exercise Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder shall evidence the right to purchase, at the adjusted Exercise Price, the number of one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided in
Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of Preferred Shares
(calculated to the nearest one hundred-thousandth of a share) obtained by (i)
multiplying (x) the number of Preferred Shares covered by a Right immediately
prior to this adjustment, by (y) the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price, and (ii) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price.
(h) The Company may elect on or after the date of any adjustment of the
Exercise Price as a result of the calculations made in Section 11(b) or (c) to
adjust the number of Rights, in substi tution for any adjustment in the number
of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-thousandth) obtained by dividing
the Exercise Price in effect immediately prior to adjustment of the Exercise
Price by the Exercise Price in effect immediately after adjustment of the
Exercise Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Exercise Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Exercise Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Exercise Price or the number of Preferred Shares issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price per one one-thousandth of a Preferred Share and the number of one-thousandths of a Preferred Share which were expressed in the initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the Exercise Price below the par or stated value, if any, of the number of one- thousandths of a Preferred Share issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue as fully paid and nonassessable shares such number of one-thousandths of a Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, prior to
the Distribution Date, the Company shall be entitled to make such reductions in
the Exercise Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Preferred or Common Shares, (ii) issuance wholly for cash of any Preferred or
Common Shares at less than the current market price, (iii) issuance wholly for
cash of Preferred or Common Shares or securities which by their terms are
convertible into or exchangeable for Preferred or Common Shares, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such stockholders.
(m) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit to be taken) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the outstanding Common
Shares (by reverse stock split or otherwise) into a smaller number of Common
Shares, or (D) issue any shares of its capital stock in a reclassification of
the Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11(a) and Section 7(e) hereof: (1) each Common Share (or shares of
capital stock issued in such reclassification of the Common Shares) outstanding
immediately following such time shall have associated with it the number of
Rights as were associated with one Common Share immediately prior to the
occurrence of the event described in clauses (A)-(D) above; (2) the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event. Each
Common Share that shall become outstanding after an adjustment has been made
pursuant
to this Section 11(n) shall have associated with it the number of Rights,
exercisable at the Exercise Price and for the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) as one Common Share has
associated with it immediately following the adjustment made pursuant to this
Section 11(n). If an event occurs which would require an adjustment under both
this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided for in
this Section 11(n) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give such notice shall not affect the validity of such adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
(a) In the event that, following a Triggering Event, directly or indirectly:
(i) the Company shall consolidate with, or merge with and into, any other Person (other than a wholly-owned Subsidiary of the Company in a transaction the principal purpose of which is to change the state of incorporation of the Company and which complies with Section 11(m) hereof);
(ii) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other person (or the Company); or
(iii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or one or more of its wholly owned Subsidiaries in one or more transactions, each of which individually (and together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) each holder of a Right (except as provided in Section 7(e) hereof) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the Total Exercise Price applicable immediately prior to the occurrence of the Section 13 Event in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by 50% of the Current Per Share Market Price of the
Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(e) hereof;
(B) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Total Exercise Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Shares of the Principal Party receivable upon the exercise of such Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.
(F) For purposes hereof, the "earning power" of the Company and its Subsidiaries shall be determined in good faith by the Company's Board of Directors on the basis of the operating earnings of each business operated by the Company and its Subsidiaries during the three fiscal years preceding the date of such determination (or, in the case of any business not operated by the Company or any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Company or any Subsidiary).
(b) For purposes of this Agreement, the term "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in clause (i) or (ii) of
Section 13(a) hereof: (A) the Person that is the issuer of the securities into
which the Common Shares are converted in such merger or consolidation, or, if
there is more than one such issuer, the issuer the Common Shares of which have
the greatest aggregate market value of shares outstanding, or (B) if no
securities are so issued, (x) the Person that is the other party to the merger,
if such Person survives said merger, or, if there is more than one such Person,
the Person the Common Shares of which have the greatest aggregate market value
of shares outstanding or (y) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the consolidation;
and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such transaction
or transactions receives the same portion of the assets or earning power so
transferred and each such portion would, were it not for the other equal
portions, constitute the greatest portion of the assets or earning power so
transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized Common Shares that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement confirming that such Principal Party shall, upon consummation of such Section 13 Event, assume this Agreement in accordance with Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive rights in respect of the issuance of Common Shares of such Principal Party upon exercise of outstanding Rights have been waived, that there are no rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights and that such transaction shall not result in a default by such Principal Party under this Agreement, and further providing that, as soon as practicable after the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date, and similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or to meet the eligibility requirements for quotation on Nasdaq and list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on Nasdaq; and
(iii) deliver to holders of the Rights historical financial statements for such Principal Party which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section 13(b) hereof has provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to Section 13 hereof), in connection with, or as a consequence of, the consummation of a Section 13 Event, Common Shares or Equivalent Shares of such Principal Party at less than the then Current Per Share Market Price thereof or securities exercisable for, or convertible into, Common Shares or Equivalent Shares of such Principal Party at less than such then Current Per Share Market Price, or (ii) providing for any special payment, tax or similar provision in connection with the issuance of the Common Shares of such Principal Party pursuant to the provisions of Section 13 hereof, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with or as a consequence of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after the Distribution Date, effect or permit to occur any Section 13 Event, if (i) at the time or immediately after
such Section 13 Event there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately after such Section 13 Event, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(b) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.
(f) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i) and
(ii) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly-
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Shares offered in such transaction is not less than the price per share
of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same form as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(f), all Rights hereunder shall expire.
(g) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 1(k) hereof.
(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share). Interests in fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a Preferred Share.
For purposes of this Section 14(b), the current market value of a Preferred Share shall be one thousand times the closing price of a Common Share (as determined pursuant to the second sentence of Section 1(k) hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares upon the exercise or exchange of Rights. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a Common Share. For purposes of this Section 14(c), the current market value of a Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 1(k) hereof) for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly waives his or her right to receive any fractional Rights or any fractional shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a)and 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose to be the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. In no event will the Rights Agent be liable for special, indirect, incidental or consequential loss or damage of any kind whatsoever, even if the Rights Agent has been advised of the possibility of such loss or damage.
(b) The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Rights Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corpora tion succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the written advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such written advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Per Share Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, or 23, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of a certificate furnished pursuant to Section 12 describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Rights Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of the Preferred Shares and the Common Shares by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Preferred Shares and the Common Shares by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his or her Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust or stockholder services powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Preferred Shares and the Common Shares, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement or upon the exercise, conversion or exchange of other securities of the Company outstanding at the date hereof or upon the exercise, conversion or exchange of securities hereinafter issued by the Company and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued or would create a significant risk of or result in such options' or employee plans' or arrangements' failing to qualify for otherwise available special tax treatment and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Company may, at its option and with the approval of the Board of Directors, at any time prior to the Close of Business on the earlier of (i) the tenth day following the Shares Acquisition Date (or such later date as may be determined by action of a majority of Continuing Directors then in office and publicly announced by the Company) and (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being herein referred to as the "REDEMPTION PRICE") and the Company may, at its option, pay the Redemption Price either in Common Shares (based on the Current Per Share Market Price thereof at the time of redemption) or cash. Such redemption of the Rights by the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish; provided, however, if the Board of Directors of the Company authorizes redemption of the Rights on or after the time a Person becomes an Acquiring Person, then there must be
Continuing Directors then in office and such authorization shall require the concurrence of a majority of such Continuing Directors. The date on which the Board of Directors elects to make the redemption effective shall be referred to as the "REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent, and without any further action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. The Company
shall promptly give public notice of any such redemption; provided, however,
that the failure to give or any defect in, any such notice shall not affect the
validity of such redemption. Within ten (10) days after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
(a) Subject to applicable laws, rules and regulations, and subject to subsection 24(c) below, the Company may, at its option, by majority vote of the Board of Directors and a majority vote of the Continuing Directors, at any time after the occurrence of a Triggering Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection 24(a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with Section 24(a), the Company shall either take
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights or alternatively, at the option of a
majority of the Board of Directors, with respect to each Right (i) pay cash in
an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c) only, the Current Value shall mean the
product of the Current Per Share Market Price of Common Shares on the date of
the occurrence of the event described above in subparagraph (a), multiplied by
the number of Common Shares for which the Right otherwise would be exchangeable
if there were sufficient shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (i), (ii) or (iii)
of this Section 24(c), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) shall have occurred, in order
to seek any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Common Shares would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Common Share (as determined pursuant to the second sentence of Section 1(k) hereof).
(e) The Company may, at its option, by majority vote of the Board of Directors, at any time before any Person has become an Acquiring Person, exchange all or part of the then outstanding Rights for rights of substantially equivalent value, as determined reasonably and with good faith by the Board of Directors, based upon the advice of one or more nationally recognized investment banking firms.
(f) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection 24(e) of this Section 24 and without any further action and without
any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of rights in exchange therefor as has been determined by the Board of Directors in accordance with subsection 24(e) above. The Company shall give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the transfer agent for the Common Shares of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Rights will be effected.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose to effect or permit to occur any Triggering Event or Section 13 Event, the Company shall give notice thereof to each holder of Rights in accordance with Section 26 hereof at least twenty (20) days prior to occurrence of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Sections 11(a)(ii) and 13 hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
Rambus Inc.
2465 Latham Street
Mountain View, California 94040
Attention: Gary Harmon
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Richard J. Char, Esq.
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
[RIGHTS AGENT]
[Address]
[Address]
Attention: ____________________
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the occurrence of a Distribution Date, the Company may supplement or amend this Agreement in any respect without the approval of any holders of Rights and the Rights Agent shall, if the Company so directs, execute such supplement or amendment. From and after the occurrence of a Distribution Date, the Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Rights in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder (which shortening or lengthening shall be effective only if there are Continuing Directors and shall require the concurrence of a majority of such Continuing Directors) or (iv) to change or supplement the provisions hereunder in any manner that the Company may deem necessary or desirable and that shall not adversely affect the interests of the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company (or, where specifically provided for herein, the Continuing Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or the Company (or, where specifically provided for herein, the Continuing Directors), or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board (or, where specifically provided for herein, by the Continuing Directors) in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other parties and (y) not subject the Board or the Continuing Directors to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement and each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
"COMPANY" RAMBUS INC.
By:
--------------------------------------
Gary Harmon, Vice President and
Chief Financial Officer
"RIGHTS AGENT" [RIGHTS AGENT]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
|
CERTIFICATE OF DESIGNATIONS OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF RAMBUS INC.
The undersigned, Geoffrey Tate and Gary Harmon do hereby certify:
1. That they are the duly elected and acting President and Secretary, respectively, of Rambus Inc., a Delaware corporation (the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the said Corporation, the said Board of Directors on February 28, 1997 adopted the following resolution creating a series of 40,000 shares of Preferred Stock designated as Series A Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors of the corporation by the Restated Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock of the Corporation and does hereby fix and herein state and express the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of such series of Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be designated as "SERIES A PARTICIPATING PREFERRED STOCK." The Series A Participating Preferred Stock shall have a par value of $0.001 per share, and the number of shares constituting such series shall be 40,000.
Section 2. Proportional Adjustment. In the event the Corporation shall at any time after the issuance of any share or shares of Series A Participating Preferred Stock (i) declare any dividend on Common Stock of the Corporation ("COMMON STOCK") payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Corporation shall simultaneously effect a proportional adjustment to the number of outstanding shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of January, April, July and October in each year (each such date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A
Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series A Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) Except as required by law, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make any distribution on, or redeem or purchase or otherwise acquire for consideration any shares of Common Stock after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock unless concurrently therewith it shall declare a dividend on the Series A Participating Preferred Stock as required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section 3 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with Series A Participating Preferred Stock, except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner.
Section 6. Reacquired Shares. Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein and, in the Restated Certificate of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive an aggregate amount per share equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends on such shares of Series A Participating Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.
Section 9. No Redemption. The shares of Series A Participating Preferred Stock shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 11. Amendment. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preference or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series A Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of this corporation be, and they hereby are, authorized and directed to prepare and file a Certificate of Designation of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of Delaware law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution."
We further declare under penalty of perjury that the matters set forth in the foregoing Certificate of Designation are true and correct of our own knowledge.
Executed at Mountain View, California, on March 21, 1997.
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) MARCH 21, 2007, (ii) THE DATE TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(E) OF SUCH RIGHTS AGREEMENT.]/*/
RIGHTS CERTIFICATE
RAMBUS INC.
This certifies that ______________________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of March 21,1997, (the "RIGHTS AGREEMENT"), between Rambus Inc., a Delaware corporation (the "COMPANY"), and [RIGHTS AGENT] ( the "RIGHTS AGENT"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York time, on March 21, 2007 at the office of the Rights Agent designated for such purpose, or at the office of its successor as Rights Agent, one one-thousandth (1/1,000) of a fully paid non-assessable share of Series A Participating Preferred Stock, $0.001 par value, (the "PREFERRED SHARES"), of the Company, at a Exercise Price of ONE HUNDRED TWENTY FIVE DOLLARS ($125.00) per one-thousandth of a Preferred Share (the "EXERCISE PRICE"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of one-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above are the number and Exercise Price as of March 21, 1997 based on the Preferred Shares as constituted at such date. As provided in the Rights Agreement, the Exercise Price and the number and kind of Preferred Shares or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Rights Certificate (i) may be redeemed by the Company, at its option, at a redemption price of $0.01 per Right or (ii) may be exchanged by the Company in whole or in part for Common Shares, substantially equivalent rights or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate amount of securities as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred Share will be issued upon the exercise of any Right or Rights evidenced hereby but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of _______________, 19____.
ATTEST: RAMBUS INC.
By:
- ------------------------------------ ---------------------------------
Gary Harmon, Secretary Geoffrey Tate, President
Countersigned:
[RIGHTS AGENT]
as Rights Agent
By:
----------------------------------
Its:
---------------------------------
|
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
(To be executed by the registered holder if such holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________________________ hereby sells, assigns and transfers unto
Dated: _______________, 19____
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States.
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person, or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19____
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States.
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
(To be executed if holder desires to exercise the Rights Certificate)
To: ___________________________
The undersigned hereby irrevocably elects to exercise _________________________ Rights represented by this Rights Certificate to purchase the number of one-thousandths of a Preferred Share issuable upon the exercise of such Rights and requests that certificates for such number of one- thousandths of a Preferred Share issued in the name of:
Please insert social security
or other identifying number
If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
Dated: ___________________ , 19____
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States.
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19____
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States.
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
The signature in the foregoing Forms of Assignment and Election must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
STOCKHOLDER RIGHTS PLAN
RAMBUS INC.
Distribution and
Transfer of Rights;
Rights Certificate:
The Board of Directors has declared a dividend of one Right for each share of Rambus Inc. Common Stock outstanding. Prior to the Distribution Date referred to below, the Rights will be evidenced by and trade with the certificates for the Common Stock. After the Distribution Date, Rambus Inc. (the "COMPANY") will mail Rights certificates to the Company's stockholders and the Rights will become transferable apart from the Common Stock.
Distribution Date:
Rights will separate from the Common Stock and become exercisable following (a) the tenth day (or such later date as may be deter mined by a majority of the Directors not affiliated with the acquiring person or group (the "CONTINUING DIRECTORS")) after a person or group acquires beneficial ownership of 15% or more of the Company's Common Stock or (b) the tenth business day (or such later date as may be determined by a majority of the Continuing Directors) after a person or group announces a tender or exchange offer, the consummation of which would result in ownership by a person or group of 15% or more of the Company's Common Stock.
Preferred Stock
Purchasable Upon
Exercise of Rights:
After the Distribution Date, each Right will entitle the holder to purchase for $125.00 (the "EXERCISE PRICE"), a fraction of a share of the Company's Preferred Stock with economic terms similar to that of one share of the Company's Common Stock.
Flip-In:
If an acquiror (an "ACQUIRING PERSON") obtains 15% or more of the Company's Common Stock (other than pursuant to a tender offer deemed adequate and in the best interests of the Company and its stockholders by the Continuing Directors (a "PERMITTED OFFER")), then each Right (other than Rights owned by an Acquiring Person or its affiliates) will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of the Com pany's Common Stock having a then current market value of twice the Exercise Price.
Flip-Over:
If, after an Acquiring Person obtains 15% or more of the Company's Common Stock, (a) the Company merges into another entity, (b) an acquiring entity merges into the Company or (c) the Company sells more than 50% of the Company's assets or earning power, then each Right (other than Rights owned by an Acquiring
Person or its affiliates) will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of Common Stock of the person engaging in the transaction having a then current market value of twice the Exercise Price (unless the transaction satisfies certain conditions and is consummated with a person who acquired shares pursuant to a Permitted Offer, in which case the Rights will expire).
Exchange Provision:
At any time after the date an Acquiring Person obtains 15% or more of the Company's Common Stock and prior to the acquisition by the Acquiring Person of 50% of the outstanding Common Stock, a majority of the Board of Directors and a majority of the Continuing Directors of the Company may exchange the Rights (other than Rights owned by the Acquiring Person or its affiliates), in whole or in part, for shares of Common Stock of the Company at an exchange ratio of one share of Common Stock per Right (subject to adjustment).
Redemption of
the Rights:
Rights will be redeemable at the Company's option for $0.01 per Right at any time on or prior to the tenth day (or such later date as may be determined by a majority of the Continuing Directors) after public announcement that a Person has acquired beneficial ownership of 15% or more of the Company's Common Stock (the "SHARES ACQUISITION DATE").
Expiration of
the Rights:
The Rights expire on the earliest of (a) March 21, 2007, (b) exchange or redemption of the Rights as described above, or (c) consummation of a merger, consolidation or asset sale resulting in expiration of the Rights as described above.
Amendment of
Terms of Rights:
The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the Rights holders on or prior to the Distribution Date; thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the Rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of Rights holders (other than the Acquiring Person).
Voting Rights:
Rights will not have any voting rights.
Anti-Dilution
Provisions:
Rights will have the benefit of certain customary anti-dilution provisions.
Taxes:
The Rights distribution should not be taxable for federal income tax purposes. However, following an event which renders the Rights exercisable or upon redemption of the Rights, stockholders may recognize taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights Plan only and is qualified in its entirety by reference to the detailed terms of the Rights Agreement dated as of March 21, 2007, between the Company and the Rights Agent.
EXHIBIT 4.4
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OR CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS AND (II) SUCH TRANSFER IS EFFECTED IN ACCORDANCE WITH THE TERMS SET FORTH IN THIS WARRANT.
NO. [1] RAMBUS INC. JANUARY 7, 1997
COMMON STOCK PURCHASE WARRANT
This certifies that, for good and valuable consideration, Intel Corporation ("Intel"), or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Rambus Inc., a California corporation (the "Company"), in whole or from time to time in part, up to one million (1,000,000) fully paid and nonassessable shares of Common Stock of the Company ("Warrant Stock") at a purchase price per share of ten dollars ($10.00) (the "Exercise Price"). Such number of shares, type of security and Exercise Price are subject to adjustment as provided herein, and all references to "Warrant Stock" and "Exercise Price" herein shall be deemed to include any such adjustment or series of adjustments.
1. EXERCISE OF WARRANT
(a) Vesting Time. The term "Vesting Time" means the close of business on the last day of the first two-calendar quarter period in which more than twenty percent (20%) of the main memory chipsets shipped by Intel in each calendar quarter in such period implemented the Rambus-1 Interface Specification or the Rambus-2 Interface Specification.
(b) Expiration Time. The term "Expiration Time" means the close of business on the eighth (8th) anniversary of the date hereof; provided, however, that if the Vesting Time shall not have occurred on or prior to December 31, 2000, then the term "Expiration Time" shall mean the close of business on December 31, 2000.
(c) Exercise Procedure. The purchase rights represented by this Warrant are
exercisable, in whole or in part, at any time and from time to time at or after
the Vesting Time and at or prior to the Expiration Time, by the surrender of
this Warrant and the Notice of Exercise form attached hereto duly executed to
the office of the Company at 2465 Latham Street, Mountain View, CA 94040, Attn:
Corporate Secretary (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company), and upon payment of the
Exercise Price for the shares thereby purchased (by wire transfer or by
certified bank check payable to the order of the Company, by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise, or by any combination thereof, in an amount equal to the purchase
price of the shares thereby purchased); whereupon the holder of this Warrant
shall be entitled to receive from the Company a stock certificate in proper form
representing the number of shares of Warrant Stock so purchased, and a new
Warrant in substantially identical form for the purchase of that number of
shares of Warrant Stock equal to the
difference, if any, between the number of shares of Warrant Stock subject hereto and the number of shares of Warrant Stock as to which this Warrant is so exercised.
2. CONVERSION OF WARRANT
The registered holder hereof shall have the right to convert this Warrant, in whole or in part, at any time and from time to time at or after the Vesting Time and at or prior to the Expiration Time, by the surrender of this Warrant and the Notice of Conversion form attached hereto duly executed to the office of the Company at the address set forth in Section 1(c) hereof (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company), into shares of Warrant Stock as provided in this Section 2. Upon exercise of this conversion right, the holder hereof shall be entitled to receive that number of shares of Warrant Stock of the Company equal to the quotient obtained by dividing [(A - B)(Y)] by (A), where:
A = the Fair Market Value (as defined below) of one share of Warrant
Stock on the date of conversion of this Warrant;
B = the Exercise Price for one share of Warrant Stock under this
Warrant; and
Y = the number of shares of Warrant Stock as to which this Warrant
is being converted.
|
If the above calculation results in a negative number, then no shares of Warrant Stock shall be issued or issuable upon conversion of this Warrant.
"Fair Market Value" of a share of Warrant Stock shall mean:
(a) if the conversion right is being exercised in connection with a transaction specified in Section 10(b) hereof, the value of the consideration (determined, in the case of noncash consideration, in good faith by the Board of Directors of the Company) to be received pursuant to such transaction by the holder of one share of Warrant Stock;
(b) if the conversion right is being exercised in connection with the initial public offering of the Company's Common Stock, the initial public offering price (before deducting commissions, discounts or expenses) at which the Common Stock is sold in such offering;
(c) if the conversion right is being exercised more than five (5) business days after the occurrence of the initial public offering of the Company's Common Stock:
(i) if the Company's Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National Market System, the average of the closing or last sale price reported for the five (5) business days immediately preceding the date that the Notice of Conversion is delivered to the Company;
(ii) if the Company's Common Stock is not traded on an exchange or on the NASDAQ National Market System, but is traded in the over-the-counter market, the mean of
the closing bid and asked prices reported for the five (5) business days immediately preceding the date that the Notice of Conversion is delivered to the Company; and
(d) in all other cases, the fair value as determined in good faith by the Company's Board of Directors.
Upon conversion of this Warrant in accordance with this Section 2, the registered holder hereof shall be entitled to receive a certificate for the number of shares of Warrant Stock determined in accordance with the foregoing, and a new Warrant in substantially identical form for the purchase of that number of shares of Warrant Stock equal to the difference, if any, between the number of shares of Warrant Stock subject hereto and the number of shares of Warrant Stock as to which this Warrant is so converted.
3. ISSUANCE OF SHARES; NO FRACTIONAL SHARES OR SCRIP
Certificates for shares purchased hereunder or issuable upon conversion hereof shall be delivered within a reasonable time after the date on which this Warrant shall have been exercised or converted in accordance with the terms hereof. The Company hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise or conversion of this Warrant will, upon such exercise or conversion, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Company agrees that the shares so issued shall be and shall for all purposes be deemed to have been issued as of the close of business on the date on which this Warrant shall have been exercised or converted in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise or conversion of this Warrant. With respect to any fraction of a share called for upon the exercise or conversion of this Warrant, an amount equal to such fraction multiplied by the Fair Market Value of a share of Warrant Stock on the date of exercise or conversion shall be paid in cash or check to the holder of this Warrant.
4. CHARGES, TAXES AND EXPENSES
Issuance of certificates for shares of Warrant Stock upon the exercise or conversion of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant.
5. NO RIGHTS AS A SHAREHOLDER
This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise or conversion hereof.
6. RESTRICTIONS ON TRANSFER; LOCK-UP
(a) Transfer of Warrant. Prior to the Expiration Time and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Company referred to in Section 1(c) hereof. Any such transfer shall be made upon surrender of this Warrant together with the Assignment Form attached hereto properly executed, endorsed and guaranteed. Notwithstanding the foregoing, the Company may prohibit the transfer of this Warrant and
the rights hereunder to more than a single transferee or to a transferee which the Company reasonably believes to be an actual or potential competitor of the Company. The Company shall not be required to effect any transfer of this Warrant or the rights hereunder unless the transferor and transferee provide the Company with an opinion of counsel that such transfer is in compliance with applicable Federal and state securities laws, or provide the Company with information sufficient for the Company or the Company's counsel to make such determination. The Company shall not be required to effect any transfer of this Warrant or the rights hereunder unless the transferee shall have agreed in writing to be bound by the restrictions set forth in this Warrant.
(b) Transfer of Warrant Stock. Prior to the closing of the initial public offering of the Company's Common Stock pursuant to a registration statement declared effective under the Securities Act of 1933, as amended (the "Securities Act"), the Company may prohibit the transfer of the Warrant Stock to more than a single transferee or to a transferee which the Company reasonably believes to be an actual or potential competitor of the Company. The Company shall not be required to effect any transfer of the Warrant Stock unless the transferor and transferee provide the Company with an opinion of counsel that such transfer is in compliance with applicable Federal and state securities laws, or provide the Company with information sufficient for the Company or the Company's counsel to make such determination. The Company shall not be required to effect any transfer of the Warrant Stock unless the transferee shall have agreed in writing to be bound by the restrictions set forth in this Warrant.
(c) Lock-Up. In connection with any registration of the offering of any securities of the Company under the Securities Act, if so requested by the Company or any representative of the underwriters (the "Managing Underwriter"), the Warrant, the Warrant Stock and any securities of the Company issued with respect thereto, and any interest therein, may not be sold, transferred or otherwise disposed of during the period specified by the Company's Board of Directors at the request of the Managing Underwriter, with such period not to exceed 180 days following the effective date of a registration statement of the Company filed under the Securities Act (the "Market Standoff Period"). The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. The restrictions set forth in this Section 6(c) shall be of no further force or effect following the transfer of the securities subject hereto pursuant to a registration statement filed under the Securities Act or pursuant to a brokers' transaction or transaction with a market maker pursuant to Rule 144 promulgated under the Securities Act.
(d) No Public Market. At the date of issuance of this Warrant, no public market exists for any of the securities of the Company and the Company makes no assurances that a public market will ever exist for the Company's securities.
(e) Legends. The certificates representing the Warrant Stock and any securities of the Company issued with respect thereto shall be imprinted with legends restricting transfer except in compliance with the terms hereof and with applicable Federal and state securities laws.
7. EXCHANGE AND REGISTRY OF WARRANT
The Company shall maintain at the office or agency referred to in Section 1(c) hereof a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer, exercise or conversion, in accordance with its terms, at such office or agency of the Company, and the Company shall be entitled to rely in all respects upon such registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and in case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company will execute and deliver to the holder, in lieu thereof, a new Warrant in substantially identical form.
9. SATURDAYS, SUNDAYS AND HOLIDAYS
If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding business day.
10. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES AND EXERCISE PRICE
The type and number of securities of the Company issuable upon exercise of this Warrant and the Exercise Price are subject to adjustment as set forth below:
(a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Automatic Conversion, etc.. The Exercise Price and the number and type of securities and/or other property issuable upon exercise of this Warrant shall be appropriately and proportionately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization, automatic conversion, redemption or other similar event affecting the number or character of outstanding shares of Warrant Stock, so that the number and type of securities and/or other property issuable upon exercise of this Warrant shall be equal to that which would have been issuable with respect to the number of shares of Warrant Stock subject hereto at the time of such event, had such shares of Warrant Stock then been outstanding.
(b) Adjustment for Reorganization, Consolidation, Merger, etc.. In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a "Reorganization"), then, in each case, the holder of this Warrant, on exercise or conversion hereof at any time after the consummation or effective date of such Reorganization, shall receive, in lieu of the Warrant Stock issuable on such exercise prior to the date of such Reorganization, the stock and other securities and property (including cash) to which such holder would have been entitled upon the date of such Reorganization if such holder had exercised this Warrant immediately prior thereto.
(c) Adjustment for Right of First Refusal. In case of any event which, under the terms of the Rambus Inc. Amended and Restated Information and Registration Rights Agreement dated of even date herewith, as such may be amended from time to time (the "Rights Agreement"), would have entitled Intel Corporation to exercise its Right of First Refusal (as defined in Section 7 of the Rights Agreement) if the Warrant Stock had been held by Intel Corporation on the date of such event, then the holder of this Warrant, upon exercise or conversion hereof at any time after the date of such event, may elect to purchase (in addition to the Warrant Stock) the type and number of securities which Intel Corporation would have been so entitled to purchase, and upon such election shall pay to the Company (in addition to the Exercise Price) the consideration which Intel Corporation would have been required to pay in connection with the exercise of such
a Right of First Refusal. The provisions of this Section 10(c) shall apply to any partial exercise or conversion of this Warrant on a pro rata basis.
(d) Certificate as to Adjustments. In case of any adjustment in the Exercise Price or number and type of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by an officer of the Company, setting forth such adjustment and showing in reasonable detail the facts upon which such adjustment is based.
11. GOVERNING LAW
This Warrant shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer.
RAMBUS INC.,
a California corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
NOTICE OF EXERCISE
To: Rambus Inc., a California corporation
(1) The undersigned hereby elects to purchase __________ shares of Common Stock of Rambus Inc., a California corporation, pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full.
(2) The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, except in compliance with applicable Federal and state securities laws.
(3) The undersigned accepts such shares subject to the restrictions on transfer set forth in the attached Warrant.
Holder: ________________________________
_________________________________ By: ________________________________
(Date)
Name: ______________________________
Title: _____________________________
|
NOTICE OF CONVERSION
To: Rambus Inc., a California corporation
(1) The undersigned hereby elects to convert that portion of the attached Warrant representing the right to purchase ________ shares of Common Stock of Rambus Inc., a California corporation, into such number of shares of Common Stock as is determined pursuant to Section 2 of such Warrant, which conversion shall be effected pursuant to the terms of the attached Warrant.
(2) The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, except in compliance with applicable federal and state securities laws.
(3) The undersigned accepts such shares subject to the restrictions on transfer set forth in the attached Warrant.
Holder: ________________________________
__________________________________ By: ____________________________________
(Date)
Name: __________________________________
Title: _________________________________
|
ASSIGNMENT FORM
(To assign the Warrant, execute this form and supply the required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the attached Warrant and all rights evidenced thereby are hereby assigned to
whose address is ______________________________________________________
(Please Print)
Dated: ___________________________________________________________
Holder's Signature: ______________________________________________
Holder's Address: ________________________________________________
Guaranteed Signature:
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by an eligible guarantor institution such as a bank, stockbroker, savings and loan association or credit union with membership in an approved medallion signature guarantee program. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the attached Warrant.
The undersigned transferee agrees to hold the Warrant and any Warrant Stock issuable upon exercise or conversion of the Warrant subject to the restrictions on transfer set forth in the Warrant.
Transferee: _____________________________________
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
Date: ____________________________________________
EXHIBIT 10.1
RAMBUS INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of _______________, 1997, by and between Rambus Inc., a Delaware corporation (the "COMPANY"), and __________ ("INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and its related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the Company wishes to provide for the indemnification of, and the advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for the Company's directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and
WHEREAS, in view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and advanced expenses by the Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
(a) "CHANGE IN CONTROL" shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then outstanding Voting Securities (as defined below), (ii) during any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets.
(b) "CLAIM" shall mean with respect to a Covered Event (as defined below):
any threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
(c) References to the "COMPANY" shall include, in addition to Rambus Inc., any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which Rambus Inc. (or any of its wholly owned subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.
(d) "COVERED EVENT" shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity.
(e) "EXPENSES" shall mean any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be unreasonably withheld), actually and reasonably incurred, of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement.
(f) "EXPENSE ADVANCE" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).
(h) References to "OTHER ENTERPRISES" shall include employee benefit plans; references to "FINES" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "SERVING AT THE REQUEST OF THE COMPANY" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF THE COMPANY" as referred to in this Agreement.
(i) "REVIEWING PARTY" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.
(j) "SECTION" refers to a section of this Agreement unless otherwise indicated.
(k) "VOTING SECURITIES" shall mean any securities of the Company that vote generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim (whether by reason of or arising in part out of a Covered Event), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder under applicable law, (i) the Company shall have no further obligation under Section 2(a) to make any payments to Indemnitee not made prior to such determination by such Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid in indemnifying Indemnitee; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified hereunder under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect. If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 15, the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there has not been a Change in Control, any Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company's certificate of incorporation or bylaws as now or hereafter in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the
Company otherwise determines or (ii) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees.
(e) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. The Company shall make Expense Advances to Indemnitee upon receipt of a written undertaking by or on behalf of the Indemnitee to repay such amounts if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified therefor by the Company.
(b) Form of Undertaking. Any written undertaking by the Indemnitee to repay any Expense Advances hereunder shall be unsecured and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties agree that for the purposes of any Expense Advance for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such Expense Advance that are certified by affidavit of Indemnitee's counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses (including without limitation Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by law as soon as practicable after written demand by Indemnitee therefor is presented to the Company, but in no event later than forty-five (45) business days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be made no later than twenty (20) business days after such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to Indemnitee's right to be indemnified or Indemnitee's right to receive Expense Advances under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law. In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement or applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by any Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated hereunder to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Claim; provided, however, that (i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's separate counsel shall be Expenses for which Indemnitee may receive indemnification or Expense Advances hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's certificate of incorporation, the Company's
bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of Expense Advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's certificate of incorporation, its bylaws, any other agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification and the payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's certificate of incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement, the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for Expenses
resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; provided, however, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, counterclaim or cross claim, except (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company's certificate of incorporation or bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law (relating to indemnification of officers, directors, employees and agents; and insurance), regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification or insurance recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any action instituted (i) by Indemnitee to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material assertions made by the Indemnitee as a basis for such action was not made in good faith or was frivolous, or (ii) by or in the name of the Company to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute; provided, however, that notwithstanding any limitation set forth in this Section 10(d) regarding the Company's obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances hereunder with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has violated said statute.
11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation. In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys' fees), regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action.
14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.
18. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.
RAMBUS INC.
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
Address: RAMBUS INC.
2465 Latham Street
Mountain View, CA 94040
AGREED TO AND ACCEPTED BY:
INDEMNITEE
EXHIBIT 10.5
RAMBUS INC.
1990 STOCK PLAN
(as amended September 14, 1994)
(as amended July 5, 1995)
(as amended September 14, 1995)
(as amended September 26, 1996)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be incentive stock options (as defined under Section 422A of the Code) or non-statutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422A of the Code, as amended, and the regulations promulgated thereunder. Stock purchase rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Rambus Inc., a California corporation.
(g) "Consultant" means any person, including an advisor, who is engaged by the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not provided that if and in the event the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include directors who are not compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of any interruption or termination of the employment relationship by the Company or any Subsidiary. Continuous Status as an Employee shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to
time; or (iv) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported, as quoted on such system or exchange, or the exchange with the greatest volume of trading in Common Stock, for the last market trading day prior to the time of determination) as reported in the Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and low asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422A of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option.
(n) "Evergreen Stock Option" means an Option which shall vest 100% as to the shares subject to such Option one year from the date that all options granted previous to, and currently held by, the Optionee have vested in full.
(o) "Evergreen II Stock Option" means an Option which shall vest cumulatively as to 1/12 of the shares subject to such Option for each month which has expired (i) in the case of Evergreen II Stock Options granted prior to September 14, 1995, since the date all options granted previous to, and currently held by, the Optionee have vested in full and (ii) in the case of Evergreen II Stock Options granted on or after September 14, 1995, since the date that all new hire Options, rehire
Options, Evergreen Stock Options and Evergreen II Stock Options granted previously to, and currently held by, the Optionee have vested in full.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option.
(r) "Optionee" means an Employee or Consultant who receives an Option.
(s) "Parent" means a "parent corporation", whether now or hereafter existing, as defined in Section 425(e) of the Code.
(t) "Plan" means this 1990 Stock Plan.
(u) "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 below.
(v) "Share" means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.
(w) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 6,875,000 shares of Common Stock. The shares may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers. With respect to grants of Options or Stock Purchase Rights to Employees who are also officers or directors of the Company, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan intended to qualify thereunder as a discretionary plan, or (B) a Committee designated by the Board to administer the Plan, which Committee shall be constituted in such a manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the Plan may be administered by different bodies with respect to directors, non- director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other Employees. With respect to grants of Options or Stock Purchase Rights to Employees or Consultants who are neither directors nor officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of California corporate and securities laws and of the Code (the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, the share price and any
restriction or limitation, or any vesting acceleration or waiver of forfeiture restrictions regarding any Option or other award and/or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant (including providing for and determining the amount, if any, of any deemed earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted; and
(x) to determine the terms and restrictions applicable to Stock Purchase Rights and the Restricted Stock purchased by exercising such Stock Purchase Rights.
(c) Effect of Committee's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. Evergreen and Evergreen II Stock Options may only be granted to Employees and Consultants who earn more than $60,000 per year. An Employee or Consultant who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in the Option Agreement; provided, however, that in the case of an Incentive Stock Option, the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares acquired upon exercise of an Option either have been owned by the Optionee for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (5) authorization from the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is exercised, (6) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, (7) by delivering an irrevocable subscription agreement for the Shares which irrevocably obligates the option holder to take and pay for the Shares not more than twelve months after the date of delivery of the subscription agreement, (8) any combination of the foregoing methods of payment, (9) or such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws. In making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration may be reasonably expected to benefit the Company (Section 315(b) of the California Corporations Code).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment. In the event of termination of an Optionee's consulting relationship or Continuous Status as an Employee with the Company (as the case may be), such Optionee may, but only within ninety (90) days (or such other period of time as is determined by the Board, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option and not exceeding ninety (90) days) after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section 9(b) above, in the event of termination of an Optionee's Consulting relationship or Continuous Status as an Employee as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid (which price shall not be less than 85% of the Fair Market Value of the Shares as of the date of the offer), and the time within which such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Administrator made the determination to grant the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Committee may determine, but in no event at a rate less than 20% per annum. If the Repurchase Option is assigned by the Company and the Fair market value of the shares, as determined by the administrator, exceeds the repurchase price, and such assignee exercises the Repurchase Option, then the assignee shall pay the Company the difference between the fair market value of the Shares repurchased and the aggregate repurchase price.
(c) Other Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock purchase agreements need not be the same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the discretion of the Administrator, Optionees may satisfy withholding obligations as provided in this paragraph. When an
Optionee incurs tax liability in connection with an Option or Stock Purchase Right, which tax liability is subject to tax withholding under applicable tax laws, and the Optionee is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Optionee may satisfy the withholding tax obligation by electing to have the Company withhold from the Shares to be issued upon exercise of the Option, or the Shares to be issued in connection with the Stock Purchase Right, if any, that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must comply with the applicable provisions of Rule 16b-3 and shall be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an Optionee and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option or Stock Purchase Right is exercised but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option will terminate immediately prior to the consummation of such proposed action. In the event of a merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation. In the event that such successor corporation does not agree to assume such Option or to substitute an equivalent option, the Board shall notify the Optionee that the Option shall be exercisable for a period of fifteen (15) days from the date of such notice to the extent that Optionee was entitled to exercise it upon the expiration of such period, and, to the extent that Optionee was not entitled to exercise such Option upon the expiration of such period, or if the Optionee does not exercise such Option to the extent so entitled within such period, the Option shall terminate. With respect to any Option granted prior to the July 17, 1992, in the event that such successor corporation refuses to assume such Option or to substitute an equivalent option, the Board shall, in lieu of such assumption or substitution, provide for the Optionee to have the right to exercise such Option as to all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger, the Board shall notify the Optionee that such Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and such Option will terminate upon the expiration of such period.
14. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date on which the Administrator makes the determination granting such Option, or such other date as is determined by the Board. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422A of the Code (or any other applicable law or regulation, including the requirements of the NASD or an established stock exchange), the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced by written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law.
20. Information to Optionees. The Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information which are provided to all shareholders of the Company. The Company shall not be required to provide such information if the issuance of Options under the Plan is limited to key employees whose duties in connection with the Company assure their access to equivalent information.
EXHIBIT 10.6
RAMBUS INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
. to attract and retain the best available personnel for positions of substantial responsibility,
. to provide additional incentive to Employees, Directors and Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. The Plan also provides for automatic grants of Nonstatutory Stock Options to Outside Directors.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Rambus Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(o) "Inside Director" means a Director who is an Employee. The term Inside Director shall include the founders, Mike Farmwald and Mark Horowitz.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice evidencing certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price.
(v) "Outside Director" means a Director who is not an Employee; provided, however, that such term shall not include the founders, Mike Farmwald and Mark Horowitz.
(w) "Optioned Stock" means the Common Stock subject to an Option or Stock Purchase Right.
(x) "Optionee" means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.
(y) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1997 Stock Plan.
(aa) "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(bb) "Restricted Stock Purchase Agreement" means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ee) "Service Provider" means an Employee, Director or Consultant.
(ff) "Share" means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.
(gg) "Stock Purchase Right" means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 1,000,000 Shares, plus an annual increase as of the last day of each of the Company's immediately preceding fiscal years during the term of the Plan equal to the lesser of (i) the number of Shares needed to restore the maximum aggregate number of Shares which may be optioned and sold under the Plan to 1,000,000 Shares, (ii) four percent (4%) of the outstanding Shares on such date, or (iii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Grants to Outside Directors. All grants of Options to Outside Directors made pursuant to Section 13 of the Plan shall be automatic and nondiscretionary.
(v) Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right of the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 16(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with
the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 250,000 Shares.
(ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 250,000 Shares which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 14.
(iv) If an Option is canceled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 14), the canceled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee's estate or, if none, by the person(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted
Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a stockholder, and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 14 of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless determined otherwise by the Administrator, an Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate.
13. Automatic Option Grants to Outside Directors.
(a) First Option. Each Outside Director who becomes an Outside Director after the effective date of this Plan shall be automatically granted a Nonstatutory Stock Option to purchase 10,000 Shares (the "First Option") on the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director but who remains a Director shall not receive a First Option.
(b) Subsequent Option. Each Outside Director shall be automatically granted a Nonstatutory Stock Option to purchase 5,000 Shares (a "Subsequent Option") on October 1 of each year; provided that he or she is then an Outside Director and, provided further, that as of such date, he or she shall have served on the Board for at least the preceding six (6) months.
(c) Terms of Options. The terms of First Options and Subsequent Options granted hereunder shall be as follows:
(A) the term of each Option shall be ten (10) years.
(B) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant. In the event that the date of grant is not a trading day, the exercise price
per Share shall be the Fair Market Value on the next trading day immediately following the date of grant.
(C) 12.5% of the Shares subject to the Option shall vest six months after the date of grant, and 1/48 of the Shares subject to the Option shall vest each month thereafter so that 100% of the Shares subject to the Option shall be vested four (4) years from the grant date, subject to the Optionee remaining a Service Provider as of such vesting dates.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option and Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company (a "Merger"), each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right
substituted by the successor corporation or a Parent or Subsidiary of the successor corporation (the "Successor Corporation").
Following such assumption or substitution in connection with a Merger, if the Optionee's status as an Employee or employee of the Successor Corporation, as applicable, is terminated by the Successor Corporation as a result of an Involuntary Termination (as defined below) other than for Cause (as defined below) within twelve months following a Merger, the Optionee shall fully vest in and have the right to exercise Optionee's Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which Optionee would not otherwise be vested or exercisable. Thereafter, the Option or Stock Purchase Right shall remain exercisable in accordance with Sections 10(b) through (d) above.
For purposes of this section, any of the following events shall
constitute an "Involuntary Termination": (i) without the Employee's express
written consent, a significant reduction of the Employee's duties, authority or
responsibilities, relative to the Employee's duties, authority or
responsibilities as in effect immediately prior to the Merger, or the assignment
to Employee of such reduced duties, authority or responsibilities; (ii) without
the Employee's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to the Merger; (iii) a
reduction by the Successor Corporation in the base salary of the Employee as in
effect immediately prior to the Merger; (iv) a material reduction by the
Successor Corporation in the kind or level of employee benefits, including
bonuses, to which the Employee was entitled immediately prior to the Merger with
the result that the Employee's overall benefits package is significantly
reduced; (v) the relocation of the Employee to a facility or a location more
than fifty (50) miles from the Employee's then present location, without the
Employee's express written consent; (vi) any purported termination of the
Employee by the Corporation which is not effected for Disability or for Cause,
or any purported termination for which the grounds relied upon are not valid;
(vii) or any act or set of facts or circumstances which would, under California
case law or statute constitute a constructive termination of the Employee.
For purposes of this section, "Cause" shall mean (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Successor Corporation, and (iv) following delivery to the Employee of a written demand for performance from the Successor Corporation which describes the basis for the Successor Corporation's belief that the Employee has not substantially performed his duties, continued violations by the Employee of the Employee's obligations to the Successor which are demonstrably willful and deliberate on the Employee's part.
In the event that the Successor Corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which
Optionee would not otherwise be vested or exercisable. If an Option or Stock
Purchase Right becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the Successor
Corporation or its Parent, the Administrator may, with the consent of the
Successor Corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
Successor Corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
18. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Grant Number _________________________ Date of Grant _________________________ Vesting Commencement Date _________________________ Exercise Price per Share $________________________ Total Number of Shares Granted _________________________ Total Exercise Price $________________________ |
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the following schedule:
12.5% of the Shares subject to the Option shall vest six months after the date
of grant, and 1/48 of the Shares subject to the Option shall vest each month
thereafter so that 100% of the Shares subject to the Option shall be vested four
(4) years from the grant date, subject to the Optionee remaining a Service
Provider as of such vesting dates.
Termination Period:
This Option may be exercised for [THREE MONTHS] after Optionee ceases to be a Service Provider. Upon the death or Disability of the Optionee, this Option may be exercised for such longer period as provided in the Plan. In no event shall this Option be exercised later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the "Optionee") an option (the "Option") to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price"), subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 16(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the "Exercised Shares"), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and delivered to [Title] of the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares;
or
(e) with the Administrator's consent, delivery of Optionee's promissory note (the "Note") in the form attached hereto as Exhibit C, in the amount of the aggregate Exercise Price of the Exercised Shares together with the execution and delivery by the Optionee of the Security Agreement attached hereto as Exhibit B. The Note shall bear interest at the "applicable federal rate" prescribed under the Code and its regulations at time of purchase, and shall be secured by a pledge of the Shares purchased by the Note pursuant to the Security Agreement.
4. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur regular federal income tax liability upon exercise of a NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is
an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO, the Optionee will have no regular federal income tax liability upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee ceases to be an Employee but remains a Service Provider, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option on the date three (3) months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years after the grant date, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price of such Shares and the aggregate Exercise Price. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately notify the Company in writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely
to the Optionee's interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
OPTIONEE: RAMBUS INC. _____________________________________ _____________________________________ Signature By _____________________________________ _____________________________________ Print Name Title ____________________________________ Residence Address ____________________________________ |
EXHIBIT A
1997 STOCK PLAN
EXERCISE NOTICE
Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
Attention: Secretary
9. Exercise of Option. Effective as of today, ________________, 199__, the undersigned ("Purchaser") hereby elects to purchase ______________ shares (the "Shares") of the Common Stock of Rambus Inc. (the "Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement dated _____________, 19___ (the "Option Agreement"). The purchase price for the Shares shall be $_____________, as required by the Option Agreement.
10. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares.
11. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
12. Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 14 of the Plan.
13. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser's purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
14. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser's interest except by means of a writing
signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: RAMBUS INC.
_________________________________ ______________________________________
Signature By
_________________________________ ______________________________________
Print Name Title
Address: Address:
_________________________________ Rambus Inc.
2465 Latham Drive
_________________________________ Mountain View, CA 94040
_____________________________________
Date Received
|
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Rambus Inc., a Delaware corporation ("Pledgee"), and _________________________ ("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option Agreement dated ________ (the "Option"), between Pledgor and Pledgee under Pledgee's 1997 Stock Plan, and Pledgor's election under the terms of the Option to pay for such shares with his promissory note (the "Note"), Pledgor has purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price of $________ per share, for a total purchase price of $__________. The Note and the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of the transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by certificate number ______, duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who shall hold said certificate subject to the terms and conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if, as and when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Option, and the Pledge holder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter into this Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances, defenses and liens, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender" within the
meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all payments of principal and interest are made as they become due under the terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any stock dividend, reclassification, readjustment or other changes are declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge, subscription Options or other rights or options shall be issued in connection with the pledged Shares, such rights, Options and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the Option or contained in this Security Agreement for a period of 10 days after written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee shall thereafter be entitled to pursue its remedies under the California Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder here under upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be that number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, withdraw, pledge, substitute or otherwise dispose of all or any part of the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of all indebtedness secured hereby, at which time the remaining pledged stock shall be promptly delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency proceeding is instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become immediately due and payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence, Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and governed under the internal substantive laws, but not the choice of law rules, of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
"PLEDGOR" _________________________________
Signature
_________________________________
Print Name
Address: _________________________________
_________________________________
"PLEDGEE" Rambus Inc.,
a Delaware corporation
_________________________________
Signature
_________________________________
Print Name
_________________________________
Title
"PLEDGEHOLDER" _________________________________
Secretary of
Rambus Inc.
|
EXHIBIT C
NOTE
$_______________ [City, State]
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Rambus Inc., a Delaware corporation (the "Company"), or order, the principal sum of _______________________ ($_____________), together with interest on the unpaid principal hereof from the date hereof at the rate of _______________ percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___. Payment of principal and interest shall be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of ________________. This Note is secured in part by a pledge of the Company's Common Stock under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned, and shall not be required to proceed against the collateral securing this Note in the event of default.
In the event the undersigned shall cease to be an employee, director or consultant of the Company for any reason, this Note shall, at the option of the Company, be accelerated, and the whole unpaid balance on this Note of principal and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the reasonable costs and attorneys' fees therein of the holder shall be paid by the undersigned.
1997 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company, subject to the Company's Repurchase Option and your ongoing status as a Service Provider (as described in the Plan and the attached Restricted Stock Purchase Agreement), as follows:
Grant Number _________________________ Date of Grant _________________________ Price Per Share $________________________ Total Number of Shares Subject _________________________ to This Stock Purchase Right Expiration Date: _________________________ |
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By your signature and the signature of the Company's representative below, you and the Company agree that this Stock Purchase Right is granted under and governed by the terms and conditions of the 1997 Stock Plan and the Restricted Stock Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a part of this document. You further agree to execute the attached Restricted Stock Purchase Agreement as a condition to purchasing any shares under this Stock Purchase Right.
GRANTEE: RAMBUS INC. ___________________________ ________________________________ Signature By ___________________________ ________________________________ Print Name Title |
EXHIBIT A-1
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an Service Provider, and the Purchaser's continued participation is considered by the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity interest in the Company as an incentive for the Purchaser to participate in the affairs of the Company, the Administrator has granted to the Purchaser a Stock Purchase Right subject to the terms and conditions of the Plan and the Notice of Grant, which are incorporated herein by reference, and pursuant to this Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to purchase shares of the Company's Common Stock (the "Shares"), at the per Share purchase price and as otherwise described in the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be paid by delivery to the Company at the time of execution of this Agreement of cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for any or no reason (including death or disability) before all of the Shares are released from the Company's Repurchase Option (see Section 4), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company) have an irrevocable, exclusive option (the "Repurchase Option") for a period of sixty (60) days from such date to repurchase up to that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the original purchase price per share (the "Repurchase Price"). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of the Shares being repurchased and all
rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares hereunder, the Company may designate and assign one or more employees, officers, directors or stockholders of the Company or other persons or organizations to exercise all or a part of the Company's purchase rights under this Agreement and purchase all or a part of such Shares. If the Fair Market Value of the Shares to be repurchased on the date of such designation or assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of such Shares, then each such designee or assignee shall pay the Company cash equal to the difference between the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
(a) _______________________ percent (______%) of the Shares shall be released from the Company's Repurchase Option [one year] after the Date of Grant and __________________ percent (______%) of the Shares [at the end of each month thereafter], provided that the Purchaser does not cease to be a Service Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6 or the transfer of the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in any way until such Shares are released from the Company's Repurchase Option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the Repurchase Option, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the "Escrow Holder") the share certificates representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached hereto as Exhibit A-3, until such time as the Company's Repurchase Option expires.
(b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow while acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from the Repurchase Option, upon request the Escrow Holder shall promptly cause a new certificate to be issued for the released Shares and shall deliver the certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the rights of a stockholder with respect to the Shares while they are held in escrow, including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. If, from time to time during the term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Purchaser is entitled by reason of the Purchaser's ownership of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as "Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE Stockholder, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Purchaser understands that the Purchaser (and not the Company) shall be responsible for the Purchaser's own tax liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the purchase price for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within 30 days from the date of purchase. The form for making this election is attached as Exhibit A-4 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive laws, but not the choice of law rules of California. This Agreement, subject to the terms and conditions of the Plan and the Notice of Grant, represents the entire agreement between the parties with respect to the purchase of the Shares by the Purchaser. Subject to Section 16(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by either the Company or the Purchaser pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns. The rights and obligations of the Purchaser under this Agreement may only be assigned with the prior written consent of the Company.
(d) Either party's failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are cumulative and shall not constitute a waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is familiar with the terms and provisions of the Plan, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Purchaser has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Purchaser agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Agreement. Purchaser further agrees to notify the Company upon any change in the residence indicated in the Notice of Grant.
DATED: _____________________ PURCHASER: RAMBUS INC. _____________________________ _________________________________ Signature By _____________________________ _________________________________ Print Name Title |
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto ____________________________________(__________) shares of the Common Stock of Rambus Inc. standing in my name of the books of said corporation represented by Certificate No. _____ herewith and do hereby irrevocably constitute and appoint _________________________________________ ______ to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement (the "Agreement") between________________________ and the undersigned dated ______________, 19__.
Dated: _______________, 19__
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Repurchase Option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
_____________, 19__
Corporate Secretary
Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
Dear _________________:
As Escrow Agent for both Rambus Inc., a Delaware corporation (the "Company"), and the undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to collectively as the "Company") exercises the Company's Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company's Repurchase Option. Within 90 days after Purchaser ceases to be a Service Provider, you shall deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company's Repurchase Option.
5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of the other parties hereto.
COMPANY: Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
PURCHASER:
_____________________________
_____________________________
_____________________________
ESCROW AGENT: Corporate Secretary
Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
|
16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of California.
Very truly yours,
RAMBUS INC.
PURCHASER:
ESCROW AGENT:
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:
NAME: TAXPAYER: SPOUSE: ADDRESS: IDENTIFICATION NO.: TAXPAYER: SPOUSE: |
TAXABLE YEAR:
2. The property with respect to which the election is made is described as follows: __________ shares (the "Shares") of the Common Stock of Rambus, Inc. (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain events. This right lapses with regard to a portion of the Shares based on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
Dated: ___________________, 19____ ___________________________________ Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ ___________________________________
Spouse of Taxpayer
EXHIBIT 10.7
RAMBUS INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock Purchase Plan of Rambus Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code .
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Rambus Inc. and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings, but exclusive of payments for overtime, shift premium, incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the Company for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board, or;
(4) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair Market Value shall be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company's Common Stock (the "Registration Statement").
(k) "Offering Periods" shall mean the periods of approximately twenty-
four (24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or after April 30,
1999. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period commencing after one Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end with the next Exercise Date.
(o) "Reserves" shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1 and November 1 each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 20 hereof; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the last Trading Day on or after April 30, 1999. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without shareholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company's payroll office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding fifteen (15%) of the Compensation which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Board may, in its discretion, limit the number of participation rate changes during any Offering Period. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be decreased to zero percent (0%) at any time during a Purchase Period. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant's account which are not sufficient to purchase a full share shall be retained in the participant's account for the subsequent Purchase Period or Offering Period, subject to earlier with drawal by the participant as provided in Section 10 hereof. Any other monies left over in a participant's account after the Exercise Date shall be returned to the participant. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant's payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a participant in the Plan.
13. Stock.
(a) Subject to Section 19, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 400,000 shares, plus an annual increase as of the last day of each of
the Company's immediately preceding fiscal years during the term of Plan equal
to the lesser of (i) the number of Shares needed to restore the maximum
aggregate number of Shares which may be optioned and sold under the Plan to
400,000 Shares, (ii) one percent (1%) of the outstanding Shares on such date, or
(iii) a lesser amount determined by the Board. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclu sive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such partici pant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the Reserves, the maximum number of shares each participant may purchase each Purchase Period (pursuant to Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Periods shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, any Purchase Periods then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date") and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors on any Exercise Date if the Board determines that the termination of the Plan is in the best interests of the Company and its shareholders. Except as provided in Section 19 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent permitted by any applicable laws, regulations, or stock exchange rules if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is equal to or lower than the Fair Market Value of the Common Stock on the Enrollment Date of such Offering Period, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their option on such Exercise Date and automatically re- enrolled in the immediately following Offering Period as of the first day thereof.
EXHIBIT A
RAMBUS INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to participate in the Rambus Inc. 1997 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to pur chase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (from 1 to 15%) during the Offering Period in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):
______________________________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares) or one year after the Exercise Date, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing
within 30 days after the date of any disposition of my shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan:
NAME: (Please print)___________________________________________________________
(First) (Middle) (Last)
Relationship
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
|
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary other
than spouse)
|
EXHIBIT B
RAMBUS INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Rambus Inc. 1997 Employee Stock Purchase Plan which began on ____________, 1997 (the "Enrollment Date") hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated. The undersigned under stands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement.
Name and Address of Participant:
Signature:
Date:__________________________
EXHIBIT 11.1
RAMBUS INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL NET INCOME (LOSS) PER SHARE
THREE MONTHS
YEAR ENDED SEPTEMBER ENDED DECEMBER
30, 31,
------------------------- ----------------
1996 1995 1996 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
Net income (loss).................. $(6,629) $(7,020) $(4,415) $(1,126) $ 92
======= ======= ======= ======= =======
Shares used in computing net income
(loss) per share:
Weighted average common shares
outstanding..................... 4,723 5,264 5,686 5,596 5,840
Net effect of Convertible
Preferred Stock (using the as
converted method)............... -- -- -- -- 11,297
Options issued within twelve
months based on the Treasury
Stock method.................... 449 449 449 449 449
Additional dilutive options...... -- -- -- -- 2,432
------- ------- ------- ------- -------
5,172 5,713 6,135 6,045 20,018
======= ======= ======= ======= =======
Net income (loss) per share........ $ (1.28) $ (1.23) $ (0.72) $ (0.19) $ 0.01
======= ======= ======= ======= =======
|
PRO FORMA NET INCOME (LOSS) PER SHARE
YEAR ENDED THREE MONTHS
SEPTEMBER 30, ENDED
1996 DECEMBER 31, 1996
------------- -----------------
(UNAUDITED)
Net income (loss).............................. $(4,415) $92
======= =======
Pro forma shares used in computing net income
(loss) per share:
Weighted average common shares outstanding... 5,686 5,840
Net effect of Convertible Preferred Stock
(using the as converted method)............. 11,297 11,297
Options issued within twelve months based on
the Treasury Stock method................... $ 449 $ 449
Additional dilutive options.................. -- 2,432
------- -------
17,432 20,018
======= =======
Pro forma net income (loss) per share.......... $ (0.25) $ 0.01
======= =======
|
EXHIBIT 21.1
Rambus K.K. (Japan)
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No. 333- ) of our report dated November 1, 1996, except for Note 17 for which the date is February 28, 1997, on our audits of the consolidated financial statements and financial statement schedule of Rambus Inc. and Subsidiary as of September 30, 1995 and 1996 and for the years ended September 30, 1994, 1995 and 1996. We also consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
March 6, 1997
| ARTICLE 5 |
| PERIOD TYPE | YEAR | 3 MOS |
| FISCAL YEAR END | SEP 30 1996 | SEP 30 1997 |
| PERIOD START | OCT 01 1995 | OCT 01 1996 |
| PERIOD END | SEP 30 1996 | DEC 31 1996 |
| CASH | 742 | 2,108 |
| SECURITIES | 7,812 | 8,820 |
| RECEIVABLES | 718 | 2,919 |
| ALLOWANCES | 0 | 0 |
| INVENTORY | 0 | 0 |
| CURRENT ASSETS | 10,145 | 14,718 |
| PP&E | 7,545 | 8,075 |
| DEPRECIATION | (5,205) | (5,531) |
| TOTAL ASSETS | 12,868 | 18,703 |
| CURRENT LIABILITIES | 15,072 | 16,890 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 11 | 11 |
| COMMON | 6 | 6 |
| OTHER SE | 0 | 0 |
| TOTAL LIABILITY AND EQUITY | 12,868 | 18,703 |
| SALES | 11,270 | 5,491 |
| TOTAL REVENUES | 11,270 | 5,491 |
| CGS | 4,821 | 1,037 |
| TOTAL COSTS | 4,821 | 1,037 |
| OTHER EXPENSES | 11,017 | 4,351 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | (298) | (64) |
| INCOME PRETAX | (4,129) | 148 |
| INCOME TAX | (4,415) | 92 |
| INCOME CONTINUING | 0 | 0 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | (4,415) | 92 |
| EPS PRIMARY | (.72) | 0.005 |
| EPS DILUTED | (.72) | 0.005 |