EXHIBIT 3
INVESTOR RIGHTS AGREEMENT
3.1
EXHIBIT B
STANDARD MICROSYSTEMS CORPORATION
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and
entered into as of March 18, 1997, by and between Standard
Microsystems Corporation, a Delaware corporation (the "Company"),
and Intel Corporation, a Delaware corporation (the "Investor").
R E C I T A L S
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A. The Investor has agreed to purchase from the Company,
and the Company has agreed to sell to the Investor, shares of the
Company's Common Stock (the "Common Stock") and a Warrant (the
"Warrant") on the terms and conditions set forth in that certain
Common Stock and Warrant Purchase Agreement, dated of even date
herewith by and between the Company and the Investor (the
"Purchase Agreement").
B. The Purchase Agreement provides that the Investor shall
be granted certain information rights, registration rights and
other rights, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual promises hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
1.1 Financial Information. The Company covenants and
agrees that, commencing on the date of this Agreement, for so
long as the Investor holds shares of Common Stock issued under
this Agreement or the Purchase Agreement or shares of Common
Stock issued or issuable pursuant to exercise of the Warrant, the
Company will:
(a) Annual Reports. Furnish to the Investor promptly
following the filing of such report with the U.S. Securities and
Exchange Commission (the "SEC"), a copy of the Company's Annual
Report on Form 10-K for each fiscal year, which shall include a
consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of
Cash Flows of the Company and its subsidiaries for such year,
setting forth in each case in comparative form the figures from
the Company's previous fiscal year, all prepared in accordance
with generally accepted accounting principles and practices and
audited by nationally recognized independent certified public
accountants. In the event the Company shall no longer be
required to file Annual Reports on Form 10-K, the Company shall,
within ninety (90) days following the end of each respective
fiscal year, deliver to the Investor a copy of such Balance
Sheet, Statement of Income and Statement of Cash Flows.
3.2
(b) Quarterly Reports. Furnish to the Investor
promptly following the filing of such report with the SEC, a copy
of each of the Company's Quarterly Reports on Form 10-Q, which
shall include a consolidated Balance Sheet as of the end of the
respective fiscal quarter, consolidated Statements of Income and
consolidated Statements of Cash Flows of the Company and its
subsidiaries for the respective fiscal quarter and for the year-
to-date, setting forth in each case in comparative form the
figures from the comparable periods in the Company's immediately
preceding fiscal year, all prepared in accordance with generally
accepted accounting principles and practices, but all of which
may be unaudited. In the event the Company shall no longer be
required to file Quarterly Reports on Form 10-Q, the Company
shall, within forty-five (45) days following the end of each of
the first three (3) fiscal quarters of each fiscal year, deliver
to the Investor a copy of such Balance Sheet, Statements of
Income and Statements of Cash Flows.
(c) SEC Filings. The Company shall deliver to the
Investor copies of each other document filed with the SEC (as
defined herein) promptly following the filing of such document
with the SEC.
1.2 Board Observer. So long as the Investor, together with
its Majority Owned Subsidiaries (as defined in Section 6.1(c)),
holds at least the number of shares of the Company's Common Stock
equal to ten percent (10%) of the number of shares of the
Company's Common Stock and other voting securities outstanding
immediately following the closing of the Purchase Agreement minus
100 shares (such number to be proportionately adjusted for stock
splits, stock dividends, and similar events), the Company will
permit a representative of the Investor, reasonably acceptable to
the Company (the "Observer") to attend all meetings of the
Company's Board of Directors (the "Board") (whether in person,
telephonic or other) in a non-voting, observer capacity and shall
provide to the Investor, concurrently with the members of the
Board, notice of such meeting and a copy of all materials
provided to such members. For so long as the Investor shall be
entitled to appoint an Observer pursuant to this section, the
Investor shall, by written election delivered to the Company, be
entitled to designate a representative for appointment or
election to the Board (the "Representative"), in lieu of the
observer contemplated above. Upon written request of the
Investor, the Company shall use its reasonable best efforts to
cause the representative designated by the Investor to be elected
to the Board, including recommending to the stockholders of the
Company that they vote for the election to the Board of the
individual designated by the Investor. The Company shall be
entitled to recuse the Representative or Observer, as the case
may be, from portions of any Board meeting and to redact portions
of Board of Directors materials delivered to the Representative
or Observer where and to the extent that a majority of the Board
(without the Representative or Observer present) determines a
conflict of interest between the Company and the Investor is
present (but not where the conflict is a conflict that is present
for stockholders generally). The Company acknowledged and agrees
that the Observer shall be acting for the benefit of the
Investor, whose interests may not coincide with the interests of
the Company and the other shareholders, and that the Observer
shall not be deemed to have breached any duty of any kind to the
Company or its shareholders as a result of his or her acting in a
manner he or she deems to be in the interests of the Investor.
Confidential information obtained by the Representative or
Observer shall be governed by the
3.3
terms of the Intel Corporation/Standard Microsystems Corporation
Corporate Non-Disclosure Agreement # 93761.
2. REGISTRATION RIGHTS.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the
Securities Act of 1933, as amended, (the "Securities Act"), and
the declaration or ordering of effectiveness of such registration
statement
(b) Registrable Securities. The term "Registrable
Securities" means: (l) all the shares of Common Stock of the
Company issued or issuable (A) under the Purchase Agreement, (B)
pursuant to an exercise of the Warrant (shares issued or issuable
upon exercise of the Warrant are referred to herein as the
"Warrant Shares"), and (C) pursuant to the Right of Participation
(defined in Section 3 hereof) or the Right of Maintenance
(defined in Section 4 hereof), and (2) any shares of Common Stock
of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, any such shares of Common
Stock described in clause (1) of this subsection (b).
Notwithstanding the foregoing, "Registrable Securities" shall
exclude any Registrable Securities sold by a person in a
transaction in which rights under this Section 2 are not assigned
in accordance with this Agreement or any Registrable Securities
sold in a public offering, whether sold pursuant to Rule 144
promulgated under the Securities Act, or in a registered
offering, or otherwise.
(c) Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding"
shall mean the number of shares of Common Stock that are
Registrable Securities and (l) are then issued and outstanding or
(2) are then issuable pursuant to an exercise of the Warrant.
(d) Holder. For purposes of this Section 2, the term
"Holder" means any person owning of record Registrable Securities
that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any permitted assignee of
record of such Registrable Securities to whom rights under this
Section 2 have been duly assigned in accordance with this
Agreement.
(e) Form S-3. The term "Form S-3" means such form
under the Securities Act as is in effect on the date hereof or
any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the
U.S. Securities and Exchange Commission.
3.4
2.2 Demand Registration.
(a) Request by Holders. If the Company shall at any
time after the first anniversary of the Closing, as defined in
the Purchase Agreement, receive a written request from the
Holders of at least twenty-five percent (25%) of the Registrable
Securities then outstanding that the Company file a registration
statement under the Securities Act covering the registration of
Registrable Securities pursuant to this Section 2.2, then the
Company shall, within ten (10) business days of the receipt of
such written request, give written notice of such request
("Request Notice") to all Holders, and use its best efforts to
effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that Holders request
to be registered and included in such registration by written
notice given such Holders to the Company within twenty (20) days
after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided that the Registrable
Securities requested by all Holders to be registered pursuant to
such request must be at least twenty-five percent (25%) of all
Registrable Securities then outstanding; and provided further
that the Company shall not be obligated to effect any such
registration if the Company has, within the six (6) month period
preceding the date of such request, already effected a
registration under the Securities Act pursuant to this Section
2.2 or Section 2.4, or in which the Holders had an opportunity to
participate pursuant to the provisions of Section 2.3, other than
a registration from which the Registrable Securities of Holders
have been excluded (with respect to all or any portion of the
Registrable Securities the Holders requested be included in such
registration) pursuant to the provisions of Section 2.3(a).
(b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("Initiating
Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, then they shall so
advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information
in the written notice referred to in subsection 2.2(a). In such
event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the
initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Holders of a
majority of the Registrable Securities being registered and
reasonably acceptable to the Company (including a market stand-
off agreement of up to 180 days if required by such
underwriters). Notwithstanding any other provision of this
Section 2.2, if the underwriter(s) advise(s) the Company in
writing that marketing factors require a limitation of the number
of securities to be underwritten then the Company shall so advise
all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting
shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis
according to the number of Registrable Securities then
outstanding held by each Holder requesting registration
(including the initiating Holders); provided, however, that the
number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all
other securities of the Company are first entirely excluded from
the
3.5
underwriting and registration. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn
from the registration.
(c) Maximum Number of Demand Registrations. The
Company shall be obligated to effect only three (3) such
registrations pursuant to this Section 2.2.
(d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 2.2, a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board,
it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed, then
the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the
request of the initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve
(12) month period.
(e) Expenses. All expenses incurred in connection
with any registration pursuant to this Section 2.2, including
without limitation all federal and "blue sky" registration,
filing and qualification fees, printer's and accounting fees, and
fees and disbursements of counsel for the Company (but excluding
underwriters' discounts and commissions relating to shares sold
by the Holders and legal fees of counsel for the Holders), shall
be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such
Holder's proportionate share (based on the total number of shares
sold in such registration other than for the account of the
Company) of all discounts, commissions or other amounts payable
to underwriters or brokers, and the Holders' legal fees, in
connection with such offering by the Holders. Notwithstanding
the foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to this
Section 2.2 if the registration request is subsequently withdrawn
at the request of the Holders of a majority of the Registrable
Securities to be registered, unless the Holders of a majority of
the Registrable Securities then outstanding agree that such
registration constitutes the use by the Holders of one (1) demand
registration pursuant to this Section 2.2 (in which case such
registration shall also constitute the use by all Holders of
Registrable Securities of one (l) such demand registration);
provided, further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company not known
to the Holders at the time of their request for such registration
and have withdrawn their request for registration with reasonable
promptness after learning of such material adverse change, then
the Holders shall not be required to pay any of such expenses and
such registration shall not constitute the use of a demand
registration pursuant to this Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30)
days prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements
relating to any registration under Section 2.2 or Section 2.4 of
this Agreement, to any employee benefit plan or to any merger or
other corporate reorganization) and will afford each such Holder
an opportunity to include in
3.6
such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the
Registrable Securities held by such Holder shall within twenty
(20) days after receipt of the above-described notice from the
Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. If
a Holder decides not to include all of its Registrable Securities
in any registration statement thereafter filed by the Company,
such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the
Company with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
(a) Underwriting. If a registration statement under
which the Company gives notice under this Section 2.3 is for an
underwritten offering, then the Company shall so advise the
Holders of Registrable Securities. In such event, the right of
any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters
selected for such underwriting (including a market stand-off
agreement of up to 180 days if required by such underwriters).
Notwithstanding any other provision of this Agreement, if the
managing underwriter determine(s) in good faith that marketing
factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares
from the registration and the underwriting, and the number of
shares that may be included in the registration and the
underwriting shall be allocated, first to the Company, and
second, to each of the Holders and other holders of registration
rights on a parity with the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro
rata basis based on the total number of Registrable Securities
and other securities entitled to registration then held by each
such Holder or other holder; provided, however, that the right of
the underwriters to exclude shares (including Registrable
Securities) from the registration and underwriting as described
above shall be restricted so that (i) the number of Registrable
Securities included in any such registration is not reduced below
twenty-five percent (25%) of the aggregate number of Registrable
Securities for which inclusion has been requested; and (ii) all
shares that are not Registrable Securities and are held by any
other person, including, without limitation, any person who is an
employee, officer or director of the Company (or any subsidiary
of the Company) shall first be excluded from such registration
and underwriting before any Registrable Securities are so
excluded (other than to the extent that such persons are non-
employee directors or other non-employees of the Company who hold
registration rights on a parity with the Holders, such non-
employee directors and other non-employees being entitled to
participate with the participating Holders on the basis described
under "second" above). If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded
and withdrawn from the registration. For any Holder that is a
partnership, the Holder and the partners and retired partners of
such Holder, or the estates and
3.7
family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons, and for
any Holder that is a corporation, the Holder and all corporations
that are affiliates of such Holder, shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and
individuals included in such "Holder," as defined in this
sentence.
(b) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2.3 (excluding
underwriters' and brokers' discounts and commissions relating to
shares sold by the Holders and legal fees of counsel for the
Holders), including, without limitation all federal and "blue
sky" registration, filing and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel for the
Company, shall be borne by the Company.
(c) Not Demand Registration. Registration pursuant to
this Section 2.3 shall not be deemed to be a demand registration
as described in Section 2.2 above. Except as otherwise provided
herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities under
this Section 2.3.
2.4 Form S-3 Registration. In case the Company shall at
any time after the first anniversary of the Closing, as defined
in the Purchase Agreement, receive from any Holder or Holders of
a majority of all Registrable Securities then outstanding a
written request or requests that the Company effect a
registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, then the Company
will:
(a) Notice. Promptly give written notice of the
proposed registration and the Holder's or Holders' request
therefor, and any related qualification or compliance, to all
other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may
be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holders or Holders'
Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified
in a written request given within twenty (20) days after the
Company provides the notice contemplated by Section 2.4(a);
provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(1) if Form S-3 is not available for such
offering by the Holders:
(2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of
less than $5,000,000;
3.8
(3) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board
of Directors of the Company, it would be materially detrimental
to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3
registration statement no more than once during any twelve month
period for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this
Section 2.4;
(4) if the Company has, within the six (6) month
period preceding the date of such request, already effected a
registration under the Securities Act other than a registration
from which the Registrable Securities of Holders have been
excluded (with respect to all or any portion of the Registrable
Securities the Holders requested be included in such
registration) pursuant to the provisions of Section 2.3(a); or
(5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute
a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Expenses. The Company shall pay all expenses
incurred in connection with each registration requested pursuant
to this Section 2.4, (excluding underwriters' or brokers'
discounts and commissions relating to shares sold by the Holders
and legal fees of counsel for the Holders), including without
limitation federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and
disbursements of counsel.
(d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 2.4, a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board,
it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed, then
the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the
request of the initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve
(12) month period.
(e) Not Demand Registration. Form S-3 registrations
shall not be deemed to be demand registrations as described in
Section 2.2 above. Except as otherwise provided herein, Holders
may request up to 3 separate registrations of Registrable
Securities under this Section 2.4.
2.5 Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably
possible:
(a) Registration Statement. Prepare and file with the
SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration
statement to become effective, provided, however, that the
Company shall not be required to keep any such registration
statement effective for more than ninety (90) days.
3.9
(b) Amendments and Supplements. Prepare and file with
the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number
of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by
them that are included in such registration.
(d) Blue Sky. Use its best efforts to register and
qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such
states or jurisdictions.
(e) Underwriting. In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form, with the
managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notification. Notify each Holder of Registrable
Securities covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g) Opinion and Comfort Letter. Furnish, at the
request of any Holder requesting registration of Registrable
Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration,
in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent
certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable
Securities.
2.6 Furnish Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to
Sections 2.2, 2.3 or 2.4 that the selling Holders shall
3.10
furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely
effect the Registration of their Registrable Securities.
2.7 Indemnification. In the event any Registrable
Securities are included in a registration statement under
Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law;
the Company will indemnify and hold harmless each Holder, the
partners, officers and directors of each Holder, any underwriter
(as determined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act
of 1934, as amended, (the "1934 Act"), against any losses,
claims, damages, or Liabilities (joint or several) to which they
may become subject under the Securities Act, the 1934 Act or
other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in such
registration statement, including any preliminary
prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein,
or necessary to make the statements therein not
misleading, or
(iii) any violation or alleged violation by
the Company of the Securities Act, the 1934 Act, any
federal or state securities law or any rule or
regulation promulgated under the Securities Act, the
1934 Act or any federal or state securities law in
connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer
or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 2.7(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director,
underwriter or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who
controls the Company within the
3.11
meaning of the Securities Act, any underwriter and any other
Holder selling securities under such registration statement or
any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims,
damages or liabilities (joint or several) to which the Company or
any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer or controlling
person of such other Holder may become subject under the
Securities Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity
with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person,
underwriter or other Holder, partner, officer, director or
controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage,
liability or action: provided, however, that the indemnity
agreement contained in this subsection 2.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld; and provided, further, that the total amounts payable
in indemnity by a Holder under this Section 2.7(b) in respect of
any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 2.7 of notice of the commencement of any
action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.7, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, to the extent that
representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or
potential conflict of interests between such indemnified party
and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement
of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 2.7 to the
extent the indemnifying party is prejudiced as a result thereof,
but the omission so to deliver written notice to the indemnified
party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 2.7.
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or
the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any person if a copy of
3.12
the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is
required by the Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities
Act in any case in which either (i) any Holder exercising rights
under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to this
Section 2.7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 2.7 provides for
indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such selling
Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 2.7; then, and in
each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such
proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of
its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all
securities offered by and sold under such registration statement,
and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case: (A)
no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable
Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.
(f) Survival. The obligations of the Company and
Holders under this Section 2.7 shall survive until the fifth
anniversary of the completion of any offering of Registrable
Securities in a registration statement, regardless of the
expiration of any statutes of limitation or extensions of such
statutes.
2.8 Termination of the Company's Obligations. The Company
shall have no obligations pursuant to this Section 2 with respect
to any Registrable Securities proposed to be sold by a Holder in
a registration pursuant to Section 2.2, 2.3 or 2.4 more than
seven (7) years after the date of this Agreement, or, if, in the
opinion of counsel to the Company, all such Registrable
Securities proposed to be sold by a Holder may then be sold under
Rule 144 in one transaction without exceeding the volume
limitations thereunder.
2.9 No Registration Rights to Third Parties. Without the
prior written consent of the Holders of a majority in interest of
the Registrable Securities then outstanding, the Company
covenants and agrees that it shall not grant, or cause or permit
to be created, for the benefit of any person or entity any
registration rights of any kind (whether similar to the demand,
"piggyback" or Form S-3 registration rights described in this
Article 2, or otherwise) relating to shares of the Company's
Common Stock or any other voting securities of the Company, other
than rights that are on a parity with or subordinate in right to
the Holders.
3.13
3. RIGHT OF PARTICIPATION.
3.1 General. The Investor and any Majority Owned
Subsidiary of the Investor to which rights under this Section 3
have been duly assigned in accordance with Section 6 (the
Investor and each such assignee being hereinafter referred to as
a "Participation Rights Holder") shall have the right of first
refusal to purchase such Participation Rights Holder's Pro Rata
Share (as defined below), of all (or any part) of any New
Securities (as defined in Section 3.3) that the Company may from
time to time issue after the date of this Agreement (the "Right
of Participation"); provided, however, that no Participation
Rights Holder shall have the Right of Participation with respect
to any issuance of New Securities that would result in less than
a five percent (5%) reduction in such Participation Rights
Holder's Pro Rata Share.
3.2 Pro Rata Share. A Participation Rights Holder's "Pro
Rata Share" for purposes of the Right of Participation is the
ratio of (a) the number of Registrable Securities held by such
Participation Rights Holder, to (b) the difference between (i)
the total number of shares of Common Stock of the Company (and
other voting securities of the Company, if any) then outstanding
(immediately prior to the issuance of New Securities giving rise
to the Right of Participation), where for such purposes all
Warrant Shares held by the Investor and its Majority Owned
Subsidiaries are deemed outstanding, and (ii) the number of
Dilutive Securities (defined below) issued since the last Notice
Date (defined below) excluding any Maintenance Securities
(defined below) issued pursuant to the last Maintenance Notice.
3.3 New Securities. "New Securities" shall mean any Common
Stock, Preferred Stock or other voting capital stock of the
Company, whether now authorized or not, and rights, options or
warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become,
convertible or exchangeable into such Common Stock, Preferred
Stock or other capital stock, provided, however, that the term
"New Securities" shall not include:
(a) any shares of the Company's Common Stock (and/or
options or warrants therefor) issued to employees officers,
directors, contractors, advisors or consultants of the Company
pursuant to incentive agreements or incentive plans approved by
the Board;
(b) any shares of Common Stock issued under the
Purchase Agreement, as such agreement may be amended;
(c) the Warrant or any shares of Common Stock issued
upon any exercise thereof;
(d) any securities issued in connection with any stock
split stock, dividend or other similar event in which all
Participation Rights Holders are entitled to participate on a pro
rata basis;
(e) any securities issued upon the exercise,
conversion or exchange of any outstanding security if such
outstanding security constituted a New Security;
3.14
(f) any securities issued pursuant to the acquisition
of another corporation or entity by the Company by consolidation,
merger, purchase of assets, or other reorganization in which the
Company acquires, in a single transaction or series of related
transactions, assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other
corporation or entity or fifty percent (50%) or more of the
equity ownership of such other entity; or
(g) any securities issued pursuant to the Company's
"Shareholder Rights Plan" in which all Participation Rights
Holders are entitled to participate on a pro rata basis.
3.4 Procedures. In the event that the Company proposes to
undertake an issuance of New Securities (in a single transaction
or a series of related transactions) that would result in a five
percent (5%) or greater reduction in the Pro Rata Share of each
Participation Rights Holder, it shall give to each Participation
Rights Holder written notice of its intention to issue New
Securities (the "Participation Notice"), describing the amount
and the type of New Securities and the price and the general
terms upon which the Company proposes to issue such New
Securities. Each Participation Rights Holder shall have ten (10)
business days from the date of receipt of any such Participation
Notice to agree in writing to purchase such Participation Rights
Holder's Pro Rata Share of such New Securities for the price and
upon the terms and conditions specified in the Participation
Notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased (not to
exceed such Participation Rights Holder's Pro Rata Share). If
any Participation Rights Holder fails to so agree in writing
within such ten (10) business day period to purchase such
Participation Rights Holder's full Pro Rata Share of an offering
of New Securities, then such Participation Rights Holder shall
forfeit the right hereunder to purchase that part of its Pro Rata
Share of such New Securities that it did not so agree to
purchase. Such Participation Rights Holder shall purchase the
portion elected by such Participation Rights Holder concurrently
with the closing of the transaction triggering the Right of
Participation.
3.5 Failure to Exercise. Upon the expiration of such ten
(10) day period, the Company shall have 120 days thereafter to
sell the New Securities described in the Participation Notice
(with respect to which the Participation Rights Holders' rights
of first refusal hereunder were not exercised), or enter into an
agreement to do so, within sixty (60) days thereafter, at no less
than one-hundred percent (100%) of the price and upon non-price
terms not materially more favorable to the purchasers thereof
than specified in the Participation Notice. In the event that
the Company has not issued and sold such New Securities within
such 120 day period, or entered into an agreement to do so within
sixty (60) days thereafter, then the Company shall not thereafter
issue or sell any New Securities without again first offering
such New Securities to the Participation Rights Holders pursuant
to this Section 3.
3.6 Termination. The Right of Participation for the
Investor and each other Participation Rights Holder shall
terminate upon the date that the Investor and its Affiliates (as
defined in Rule 144 under the Securities Act) collectively hold
less than the number of shares of the Company's Common Stock
equal to ten percent (10%) of the number of shares of the
3.15
Company's Common Stock and other voting securities outstanding
immediately following the closing of the Purchase Agreement minus
100 shares (such number to be proportionately adjusted for stock
splits, stock dividends and similar events).
4. RIGHT OF MAINTENANCE.
4.1 General. Each Participation Rights Holder will,
pursuant to the terms and conditions of this Section 4, have the
right to purchase shares of Common Stock, voting Preferred Stock
or other voting capital stock ("Maintenance Securities") from the
Company at the Purchase Price (as defined in Section 4.3)
following the issuance by the Company of Dilutive Securities (as
defined in Section 4.2) that the Company may from time to time
issue after the date of this Agreement, solely in order to
maintain such Participation Rights Holder's Prior Percentage
Interest (as defined in Section 4.4) in the Company (the "Right
of Maintenance"). Each right to purchase Maintenance Securities
pursuant to this Section 4 shall be on the same terms (other than
price to the extent provided in Section 4.3 below) as the
issuance of the Dilutive Securities that gave rise to the right
to purchase such Maintenance Securities
4.2 Dilutive Securities. "Dilutive Securities" means any
Common Stock, voting Preferred Stock or other voting capital
stock of the Company, whether now authorized or not; provided,
however, that the term "Dilutive Securities" does not include:
(a) any securities other than Common Stock, voting
Preferred Stock or other voting capital stock (e.g., warrants or
options to purchase Common Stock, Preferred Stock or other
capital stock);
(b) any shares of Common Stock issued under the
Purchase Agreement, as such agreement may be amended;
(c) the Warrant or any shares of Common Stock issuable
upon any exercise thereof;
(d) any securities issued in connection with any stock
split, stock dividend or similar event in which all Participation
Rights Holders are entitled to participate on a pro rata basis;
(e) any securities for which the issuance gave rise to
the Right of Participation (regardless of whether any such right
was exercised); or
(f) any securities issuable upon the exercise,
conversion or exchange of any securities described in (d) or (e)
above.
4.3 Purchase Price.
(a) Employee Stock. To the extent that the right to
purchase Maintenance Securities arises out of the issuance of
Dilutive Securities to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to
incentive agreements or
3.16
incentive plans approved by the Board ("Employee Stock"), the per
share "Purchase Price" of the Maintenance Securities shall equal
the average Market Price (as defined below) of such Maintenance
Securities over the ten (10) trading days immediately preceding
the date on which the Participation Rights Holder elects to
purchase such Maintenance Securities.
(b) Other Dilutive Securities. To the extent that the
right to purchase Maintenance Securities arises out of any
issuance of Dilutive Securities other than Employee Stock, the
per share "Purchase Price" of the Maintenance Securities shall
equal the lower of (i) the weighted average of the per share
prices at which such Dilutive Securities were issued, and (ii)
the average Market Price (as defined below) of such Maintenance
Securities over the ten (10) trading days immediately preceding
the date on which the Participation Rights Holder elects to
purchase such Maintenance Securities. For purposes hereof, in
the event that the issuance of any Dilutive Securities occurs
upon the exercise, conversion or exchange of other securities
("Exchangeable Securities"), then the per share price at which
such Dilutive Securities shall be deemed to have been issued
shall be the sum of (A) the per share amount paid upon such
exercise, conversion or exchange, plus (B) the per share amount
previously paid for the Exchangeable Securities (adjusted for any
stock splits, stock dividends or other similar events).
(c) Market Price. For purposes of this Section 4.3,
"Market Price" means, as to any Maintenance Securities on a given
day, the average of the closing prices of such security's sales
on all domestic securities exchanges on which such security may
at the time be listed, or, if there have been no sales on any
such exchange on such day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day,
or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ
National Market as of 4:00 P.M., New York time, on such day, or,
if on any day such security is not quoted in the NASDAQ National
Market, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar
successor organization. If at any time the Maintenance
Securities are not listed on any domestic securities exchange or
quoted in the NASDAQ National Market or the domestic over-the-
counter market ("Unlisted Securities"), the "Market Price" shall
be the fair value thereof determined jointly by the Company and
the Holder.
(d) Consideration Other than Cash. In the event that
Dilutive Securities or Exchangeable Securities were issued for
consideration other than cash, the per share amounts paid for
such Dilutive Securities or Exchangeable Securities shall be
determined jointly by the Company and the Participation Rights
Holder.
(e) Appraiser. If the Company and the Participation
Rights Holder are unable to reach agreement within a reasonable
period of time with respect to (i) the Market Price of Unlisted
Securities, or (ii) the per share amounts paid for Dilutive
Securities or Exchangeable Securities issued for consideration
other than cash, such Market Price or per share amounts paid, as
the case may be, shall be determined by an appraiser jointly
selected by the Company and the Participation Rights Holder. The
determination of such appraiser shall be final and binding on the
Company and the Participation Rights Holder. The fees and
expenses of such appraiser shall be paid for by the Company.
3.17
4.4 Prior Percentage Interest. A Participation Rights
Holder's "Prior Percentage Interest" for purposes of the Right of
Maintenance is the ratio of (a) the number of Registrable
Securities held by such Participation Rights Holder as of the
date of such Maintenance Notice (as defined in Section 4.6) (the
"Notice Date"), to (b) the difference between (i) the total
number of shares of Common Stock of the Company (and other voting
securities of the Company, if any) outstanding on the Notice
Date, where for such purposes all Warrant Shares held by the
Investor and its Majority Owned Subsidiaries are deemed
outstanding, and (ii) the total number of Dilutive Securities
issued since the later of the date of this Agreement or the last
Notice Date excluding any Maintenance Securities (defined below)
issued pursuant to the last Maintenance Notice.
4.5 Maintenance Amount. A Participation Rights Holder's
"Maintenance Amount" with respect to any Maintenance Notice shall
equal such number of Maintenance Securities as shall (upon
purchase thereof in full by the Participation Rights Holder)
enable such Participation Rights Holder to maintain its Prior
Percentage Interest on a fully-diluted basis. As an example,
assume that the Company had 10,000 shares outstanding, and the
Participation Rights Holder holds 20% of such shares (or 2,000
shares). The Company first issues 400 shares to a third party
("Issuance 1"), an amount insufficient to trigger a Notice of
Issuance pursuant to Section 4.6. The Company then issues 4,600
shares to a third party ("Issuance 2"), an amount sufficient to
trigger a Notice of Issuance. The Participation Rights Holder
will have the right to maintain its 20% interest after
considering Issuances 1 and 2 and the new shares issued to the
Participation Rights Holder. In this example, the Participation
Rights Holder will have the right to purchase an additional 1,250
shares, thereby resulting in the Participation Rights Holder
holding 20% of the securities outstanding (3,250 shares out of
16,250 shares).
4.6 Notice of Issuance. Within fifteen (15) business days
of each anniversary of this Agreement, and within fifteen (15)
business days of each issuance of Dilutive Securities which when
cumulated with all prior issuances of Dilutive Securities since
the later of (i) the date of this Agreement, or (ii) the date of
the last Notice Date (subsequent to which the Participation
Rights Holder has had an opportunity to purchase Maintenance
Securities), results in a five percent (5%) reduction in a
Participation Rights Holders' Prior Percentage Interest, the
Company shall give to each Participation Rights Holder written
notice (the "Maintenance Notice") describing the number of
Dilutive Securities issued since such prior Notice Date and the
non-price terms upon which the Company issued such Dilutive
Securities, and the Maintenance Amount of Maintenance Securities
that such Participation Rights Holder is entitled to purchase as
a result of such issuances.
4.7 Purchase of Maintenance Securities. Each Participation
Rights Holder shall have sixty (60) days from the receipt of a
Maintenance Notice to elect to purchase up to such Participation
Rights Holder's Maintenance Amount of such Maintenance Securities
at the Purchase Price as defined in Section 4.3 and upon the
terms and conditions specified in the Maintenance Notice. The
closing of such purchase shall occur within ten (10) days after
such election to purchase. If any Participation Rights Holder
fails to elect to purchase such Participation Rights Holder's
full Maintenance Amount of Maintenance Securities within such
3.18
sixty (60) day period, then such Participation Rights Holder
shall forfeit the right hereunder to purchase that part of its
Maintenance Amount that it did not so elect to purchase.
4.8 Termination. The provisions of Sections 4.1 through
4.7 shall terminate with respect to the issuance of any Dilutive
Securities by the Company after the date that the Investor and
its Affiliates (as defined in Rule 144 under the Securities Act)
collectively hold less than the number of shares of the Company's
Common Stock equal to ten percent (10%) of the number of shares
of the Company's Common Stock and other voting securities
outstanding immediately following the closing of the Purchase
Agreement minus 100 shares (such number to be proportionately
adjusted for stock splits, stock dividends and similar events).
5. RIGHTS IN CORPORATE EVENTS.
5.l Corporate Event.
(a) A "Corporate Event" shall mean any of the
following, whether accomplished through one or a series of
related transactions (a) the acquisition of all or substantially
all the assets of the Company, (b) an acquisition of the Company
by consolidation, merger, share purchase or exchange, or other
reorganization or transaction in which the holders of the
Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities
representing less than fifty percent (50%) of the voting power of
the corporation or other entity surviving such transaction, and
(c) any other transaction or series of related transactions
(excluding any exercise or exercises of the Warrant) that would
result in a greater than thirty percent (30%) change in the total
outstanding number of shares of Voting Stock (as defined below)
of the Company (other than any such change solely as a result of
a stock split, stock dividend or other recapitalization affecting
holders of Common Stock and other classes of voting securities of
the Company on a pro rata basis).
(b) The Company agrees that it will provide the
Investor with detailed written notice of any offer from a third
party for a proposed Corporate Event within two (2) business days
of the date the Company first becomes aware of such offer or
proposed Corporate Event. In addition, the Company agrees that
it will provide the Investor, within two (2) business days of the
Company's becoming aware thereof, with detailed written notice of
any offer from a third party to acquire ten percent (10%) or more
of the Company's outstanding voting securities. The Investor
agrees to keep the information contained in such notice strictly
confidential.
5.2 Right of First Refusal The Company agrees that prior
to entering into any agreement that contemplates the consummation
of, or any transaction that would constitute, a Corporate Event,
the Company will present to the Investor in writing the final
terms and conditions of the proposed Corporate Event, including
without limitation the name of the other party or parties to the
Corporate Event and a copy of the definitive agreements that the
Company is prepared to enter into with respect to such Corporate
Event (the "Corporate Event Agreement"). The Investor shall have
ten (10) calendar days from the date of receipt of the Corporate
Event Agreement to deliver written notice to the Company agreeing
in writing to enter into an agreement with the Company on
substantially the same terms and conditions specified in the
Corporate Event Agreement, which agreement shall call for
completion within one hundred
3.19
twenty (120) days from the date of delivery of the Corporate
Event Agreement (such 120-day period subject to extensions for
regulatory compliance). If the Investor fails to so agree in
writing within such ten (10) business day period, for a period of
one hundred twenty (120) days thereafter, the Company shall have
the right to enter into the Corporate Event Agreement with the
party specified in such agreement.
5.3 Termination of Rights. The rights of the Investor
under Section 5.2 shall terminate with respect to any Corporate
Event consummated after the date that the Investor and its
Affiliates (as defined in Rule 144 under the Securities Act)
collectively hold less than the number of shares of the Company's
Common Stock equal to ten percent (10%) of the number of shares
of the Company's Common Stock and other voting securities
outstanding immediately following the closing of the Purchase
Agreement minus 100 shares (such number to be proportionately
adjusted for stock splits, stock dividends and similar events).
6. ASSIGNMENT AND AMENDMENT.
6.1 Assignment. Notwithstanding anything herein to the
contrary:
(a) Information Rights. The rights of the Investor
under Section 1.1 are transferable to any Holder who acquires and
holds at least 750,000 shares of Registrable Securities (subject
to appropriate adjustment for all stock splits, dividends,
combinations, recapitalizations and the like where all holders of
the Company's Common Stock participate on a pro rata basis);
provided, however, that no party may be assigned any of the
foregoing rights unless the Company is given written notice by
the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities
of the Company as to which the rights in question are being
assigned; and provided further that any such assignee shall
receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the
provisions of this Section 6. The rights of the Investor under
Section 1.2 may not be assigned.
(b) Registration Rights. The registration rights of
the Investor under Section 2 hereof may be assigned to any
Holder; provided, however, that no party may be assigned any of
the foregoing rights unless the Company is given written notice
by the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities
of the Company as to which the rights in question are being
assigned; and provided further that any such assignee shall
receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the
provisions of this Section 6.
(c) Rights of Participation and Maintenance. The
rights of the Investor under Sections 3 and Section 4 hereof may
be assigned only to a subsidiary of which the Investor
beneficially owns, either directly or indirectly, at least 50% of
the Total Voting Power (as defined in Section 8.1) of all
outstanding voting securities (a "Majority Owned Subsidiary");
provided, however that no party may be assigned any of the
foregoing rights unless the Company is given written notice by
the Investor at the time of such assignment stating the name and
address of the assignee and identifying the securities of the;
Company as to which the rights in
3.20
question are being assigned; and provided further that any such
assignee shall receive such assigned rights subject to all the
terms and conditions of this Agreement.
(d) Rights On Corporate Events. The rights of the
Investor under Section 5 hereof may be assigned only in whole,
and not in part, and only to a Majority Owned Subsidiary;
provided, however that no party may be assigned any of the
foregoing rights unless the Company is given written notice by
the Investor at the time of such assignment stating the name and
address of the assignee; and provided further that any such
assignee shall receive such assigned rights subject to all the
terms and conditions of this Agreement.
6.2 Amendment of Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and
Investor (or, in the case of an amendment or waiver of any
provision of Section 2 hereof, only with the written consent of
the Company and the Holders of a majority of the Registrable
Securities then outstanding and entitled to the registration
rights set forth in Section 2 hereof). Any amendment or waiver
effected in accordance with this Section 6.2 shall be binding
upon the Investor, each Holder, each permitted successor or
assignee of such Investor or Holder and the Company.
7. CONFIDENTIALITY.
7.1 (a) Except to the extent required by law or judicial
order or except as provided herein, each party to this Agreement
will hold any of the other's Confidential Information (as defined
in the next paragraph) in confidence and will: (i) use the same
degree of care to prevent unauthorized disclosure or use of the
Confidential Information that the receiving party uses with its
own information of like nature (but in no event less than
reasonable care), (ii) limit disclosure of the Confidential
Information, including any materials regarding the Confidential
Information that the receiving party has generated, to such of
its employees and contractors as have a need to know the
Confidential Information to accomplish the purposes of this
Agreement, and (iii) advise its employees, agents and contractors
of the confidential nature of the Confidential Information and of
the receiving party's obligations under this Agreement.
(b) For purposes of this Agreement, the term
"Confidential Information" refers to this Agreement, the Warrant
and the Purchase Agreement (collectively, the "Agreements"). Any
employee or contractor of the receiving party having access to
the Confidential Information will be required to sign a non-
disclosure agreement protecting the Confidential Information if
not already bound by such a non-disclosure agreement.
7.2 Except to the extent required by law or judicial order
or except as provided herein, neither party shall disclose the
Agreements or any of their terms without the other's prior
written approval, which approval will not be delayed or
unreasonably withheld. Either party may disclose the Agreements
to the extent required by law or judicial order, provided that if
such disclosure is pursuant to judicial order or proceedings, the
disclosing party will notify the other party promptly before such
disclosure and will cooperate with the other party to seek
confidential treatment with respect to the disclosure if
requested by the other party and provided further that if such
disclosure is required pursuant to the rules and regulations of
any federal, state or local
3.21
organization, the parties will cooperate to seek confidential
treatment of this Agreement to the maximum extent possible under
law.
7.3 Prior to the execution of the Agreements, the parties
will agree on the content of a joint press release announcing the
existence of this Agreement, which press release will be issued
as mutually agreed by the parties.
7.4 Neither party will be required to disclose to the other
any confidential information of any third party without having
first obtained such third party's prior written consent.
7.5 The provisions of Sections 7.1, 7.2, 7.3 and 7.4 shall
survive for a period of five (5) years from the date which the
Investor ceases to have any rights under Sections 1, 3, 4 and 5
of this Agreement.
7.6 All other confidential information exchanged by the
parties will be disclosed pursuant to the Intel
Corporation/Standard Microsystems Corporation Corporate Non-
Disclosure Agreement # 93761.
8. STANDSTILL AGREEMENT.
8.1 Standstill. The Investor hereby agrees that the
Investor (together with all Majority Owned Subsidiaries) shall
not acquire beneficial ownership (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as
amended) of any Voting Stock (as defined below), any securities
convertible into or exchangeable for Voting Stock, or any other
right to acquire Voting Stock (except, in any case, by way of
stock dividends or other distributions or offerings made
available to holders of any Voting Stock generally) without the
written consent of the Company, if the effect of such acquisition
would be to increase the Voting Power (as defined below) of all
Voting Stock then beneficially owned (as defined above) by the
Investor or which it has a right to acquire (together with all
Majority Owned Subsidiaries) to a percentage greater than twenty-
five percent (25%) (the "Standstill Percentage") of the Total
Voting Power (as defined below) of the Company at the time in
effect; provided that nothing in this Section 8 shall affect the
Investors rights under Section 5, and provided further that:
(a) The Investor may acquire Voting Stock without
regard to the foregoing limitation, and such limitation shall be
suspended, but not terminated, if and for as long as (i) a tender
or exchange offer is made and is not withdrawn or terminated by
another person or group to purchase or exchange for cash or other
consideration any Voting Stock that, if accepted or if otherwise
successful, would result in such person or group beneficially
owning or having the right to acquire shares of Voting Stock with
aggregate Voting Power of more than thirty percent (30%) of the
Total Voting Power of the Company then in effect (not counting
for these purposes any shares of Voting Stock of the Company
originally acquired ( where such Shares or shares exchanged with
the Company in respect thereof, are still held) by such person or
group from the Investor or any Majority Owned Subsidiary), and
such offer is not withdrawn or terminated prior to the Investor
making an offer to acquire Voting Stock or acquiring Voting
Stock; provided, however, that the foregoing standstill
limitation will be reinstated once any such tender or exchange
offer is withdrawn or terminated, (ii) another person or group
hereafter acquires Voting
3.22
Stock with aggregate Voting Power of more than twenty percent
(20%) of the Total Voting Power of the Company then in effect
(not counting for these purposes any shares of Voting Stock of
the Company originally acquired (where such Shares or shares
exchanged with the Company in respect thereof, are still held) by
such person or group from the Investor or any Majority Owned
Subsidiary), where such person or group files a Schedule 13D
(under the rules promulgated under Section 13(d) under the
Securities and Exchange Act of 1934, as such rules and section
are in effect on the date hereof), or other similar or successor
schedule or form, indicating that such person's or group's
holdings exceed twenty percent (20%); provided, however, that the
foregoing standstill limitation will be reinstated once the
percentage of Total Voting Power beneficially owned by such other
person or group falls below twenty percent (20%); (iii) another
person or group hereafter acquires Voting Stock that results in
such person or group being required to file a Schedule 13G, or
other similar or successor schedule or form, indicating that such
other person or group beneficially owns or has the right to
acquire Voting Stock with aggregate Voting Power of more than
twenty-five percent (25%) of the Total Voting Power of the
Company (not counting for these purposes any shares of Voting
Stock of the Company originally acquired (where such Shares or
shares exchanged with the Company in respect thereof, are still
held) by such person or group from the Investor or any Majority
Owned Subsidiary); provided, however, that the foregoing
standstill limitation will be reinstated once the percentage of
Total Voting Power beneficially owned by such other person or
group falls below twenty-five percent (25%); or (iv) another
credible person or group orally or in writing contacts the
Company and advises the Company of such person's or group's
intention to commence a tender or exchange offer that, if so
commenced, would result in a suspension pursuant to clause (i)
above (e.g., a "bear hug" offer); provided, however, that the
foregoing standstill limitation will be reinstated if such
intention is withdrawn in writing or other reasonable evidence of
such withdrawal is provided to the Investor. The Company shall
notify the Investor in writing of the occurrence of any event
described in clauses (i) through (iv) of the immediately
preceding sentence as soon as practicable following the Company's
becoming aware of any such event, and in any case, shall provide
the Investor written notice of any such event within two (2)
business days of the Company's being aware of the occurrence of
any such event.
(b) The Investor will not be obliged to dispose of any
Voting Stock to the extent that the aggregate percentage of the
Total Voting Power of the Company represented by Voting Stock
beneficially owned by the Investor or which the Investor has a
right to acquire is increased beyond the Standstill Percentage
(i) as a result of a recapitalization of the Company or a
repurchase or exchange of securities by the Company or any other
action taken by the Company or its affiliates; (ii) as the result
of acquisitions of Voting Stock made during the period when the
Investor's "standstill" obligations are suspended pursuant to
Section 8.1(a); (iii) as a result of an equity index transaction,
provided that Investor shall not vote such shares; (iv) by way of
stock dividends or other distributions or rights or offerings
made available to holders of shares of Voting Stock generally;
(v) with the consent of a simple majority of the independent
authorized members of the Company's Board of Directors; or (vi)
as part of a transaction on behalf of Investor's Defined Benefit
Pension Plan, Profit Sharing Retirement Plan, 401(k) Savings
Plan, Sheltered Employee Retirement Plan and Sheltered Employee
Retirement Plan Plus, or any successor or additional retirement
plans thereto (collectively, the "Retirement
3.23
Plans") where the Company's shares in such Retirement Plans are
voted by a trustee for the benefit of Investor employees or, for
those Retirement Plans where Investor controls voting, where
Investor agrees not to vote any shares of such Retirement Plan
Voting Stock that would cause Investor to exceed the Standstill
Percentage.
(c) As used in this Section 8, (i) the term "Voting
Stock" means the Common Stock and any other securities issued by
the Company having the ordinary power to vote in the election of
directors of the Company (other than securities having such power
only upon the happening of a contingency that has not occurred),
(ii) the term "Voting Power" of any Voting Stock means the number
of votes such Voting Stock is entitled to cast for directors of
the Company at any meeting of shareholders of the Company, and
(iii) the term "Total Voting Power" means the total number of
votes which may be cast in the election of directors of the
Company at any meeting of shareholders of the Company if all
Voting Stock was represented and voted to the fullest extent
possible at such meeting, other than votes that may be cast only
upon the happening of a contingency that has not occurred. For
purposes of this Section 8, the Investor shall not be deemed to
have beneficial ownership of any Voting Stock held by a pension
plan or other employee benefit program of the Investor if the
Investor does not have the power to control the investment
decisions of such plan or program.
8.2 Right of First Refusal upon Section 8.1(a) Event. If
the Investor or any Majority Owned Subsidiary elects to
participate and tender or exchange any of the Shares, the Warrant
and/or the Warrant Shares pursuant to any event described in
clause (i) of the first sentence of Section 8.1(a), the Investor
shall provide written notice of such intention to the Company.
The Company shall have five (5) business days from delivery of
such notice to elect to purchase all, but not less than all, of
such Shares from the Investor or Majority Owned Subsidiary for
cash, at the Offer Price (as defined below) per share offered by
the person or group in the event described in clause (i), by
delivering an irrevocable written election by the Company to
purchase such Shares at such price. In the event the Company
delivers such written election, the Company shall be obligated to
purchase, and the Investor or Majority Owned Subsidiary shall be
obligated to sell, such Shares within ten (10) business days of
delivery of the Company's written election to the Investor. If
the Company fails to deliver such written election within the
five (5) business day period described above or fails to purchase
such Shares within the ten (10) business day period described
above, it shall forfeit its rights under this Section 8.2 with
respect to such tender or exchange, regardless whether the terms
and conditions of such tender or exchange may subsequently be
modified. As used herein, "Offer Price" means (a) in the case of
a cash offer, the amount of cash per share to be paid; (b) in the
case of a share offer where the shares offered are listed on an
exchange or quoted on the Nasdaq National Market, an amount equal
to the average of the closing prices of such security's sales on
all domestic securities exchanges on which said security may at
the time be listed, or, if there have been no sales on any such
exchange on such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if
on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ National
Market as of 4:00 p.m., New York time, or, if on any day such
security is not quoted in the NASDAQ National Market, the average
of the highest bid and lowest asked prices on such day in the
domestic
3.24
over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, all
determined as of the date written notice is delivered to the
Company by the Investor pursuant to the first sentence of this
Section 8.2; or (c) in the event of any other tender or exchange
offer, the value of the securities and/or other property as set
forth in the offer by the person or group making such offer.
8.3 Right of First Refusal. If the Investor intends to
sell, in a Privately Negotiated Transaction (as defined below),
Voting Stock (including the Voting Stock underlying any portion
of the Warrants proposed to be sold) constituting one-third or
more of the Voting Stock (including the Voting Stock underlying
any such portion of the Warrant) held by the Investor (but only
if the number of Shares proposed to be sold is greater than one
percent (1%) of the Company's Voting Stock then outstanding), the
Investor shall provide written notice thereof to the Company (the
"Investor Notice"). The Investor Notice shall specify the number
of Shares involved and the proposed price per Share. For a
period of ten (10) business days after delivery of the Investor
Notice, the Company shall be entitled to elect to purchase all,
but not less than all, of the Shares described in the Investor
Notice, at the price per share described in such notice, by
delivery of a written notice (a "Company Purchase Election") to
the Investor irrevocably electing to purchase such Shares and
shall have thirty (30) business days to consummate said purchase
from the Investor. In the event that the Company has not
delivered a Company Purchase Election prior to the expiration of
such ten (10) business-day period or has failed to purchase such
Shares within said thirty (30) business day period, the Company's
right to purchase such Shares shall expire, and the Investor or
Majority Owned Subsidiary shall be entitled to sell the Shares
described in the Investor Notice for a period of sixty (60) days
following the expiration of such 60-day period, but only for a
purchase price equal to at least one-hundred percent (100%) of
the purchase price set forth in the Investor Notice. In the
event the Investor or Majority Owned Subsidiary has not sold such
Shares by the end of such 60-day period, the rights of the
Company set forth above in this Section 8.3 shall apply to any
subsequent sales by the Investor or Majority Owned Subsidiary.
Notwithstanding the foregoing, the provisions of this Section 8.3
shall not apply to any sales or other transfers by the Investor
to any Majority Owned Subsidiary. As used herein, a "Privately
Negotiated Transaction" means a sale by the Investor to an
unrelated third party in which the Investor and the third party
have directly negotiated the price and terms of such sale.
8.4 Termination of Standstill. The provisions of Sections
8.1 through 8.3 shall terminate on earlier of: (a) the tenth
anniversary of the date of this Agreement; or (b) the date when
the Investor (together with all Majority Owned Subsidiaries)
ceases to beneficially own at least five percent (5%) of the
Total Voting Power of the Company; provided, however, that for
purposes of determining beneficial ownership, the number of
Warrant Shares underlying the unexercised portion of the Warrant
shall be included.
8.5 Other Agreements. The Company agrees to require any
other purchaser of newly issued Company securities (including,
but not limited to, warrants and options) representing at least
ten percent (10%) of the voting power of the Company, on an as
converted basis, to enter into terms at least as restrictive to
such purchaser as those contained in this Section 8.
3.25
9. GENERAL PROVISIONS.
9.1 Notices. Any notice required or permitted under this
Agreement will be given in writing, shall be effective when
received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be
notified or three (3) business days after deposit with the United
States Post Office, by registered or certified mail, postage
prepaid, or one (1) business day after deposit with a nationally
recognized courier service such as Fedex for next business day
delivery, or one (1) business day after facsimile with copy
delivered by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated
for such party on the signature page hereof or at such other
address as the Investor or the Company may designate by giving at
least ten (10) days advance written notice pursuant to this
Section 10.1.
(a) if to the Investor, at: Intel Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: Treasurer,
M/S: SC4-210
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
Attention: General
Counsel, M/S SC4-203
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, at: Standard Microsystems
Corporation
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▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chairman and
CEO
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Loeb & Loeb L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-
0037
Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
3.26
Any party hereto (and such party's permitted assigns) may by
notice so given change its address for future notices hereunder.
Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner
set forth above. Any notice provided to the Investor in
accordance with this Section 10.1 shall be deemed to have also
been given to any Majority Owned Subsidiary, and any notice
provided by the Investor to the Company shall also be deemed
notice by its Majority Owned Subsidiaries, and they shall be
bound thereby.
9.2 Entire Agreement. This Agreement, together with all
the Exhibits hereto, constitutes and contains the entire
agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior
negotiations, correspondence, agreements, understandings, duties
or obligations between the parties respecting the subject matter
hereof.
9.3 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the
State of Delaware, excluding that body of law relating to
conflict of laws and choice of law.
9.4 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, then
such provision(s) shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in
accordance with its terms.
9.5 Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the
parties hereto and their permitted successors and assigns, any
rights or remedies under or by reason of this Agreement.
9.6 Successors And Assigns. Subject to the provisions of
Section 6.1, the provisions of this Agreement shall inure to the
benefit of, and shall be binding upon, the successors and
permitted assigns of the parties hereto.
9.7 Captions. The captions to sections of this Agreement
have been inserted for identification and reference purposes only
and shall not be used to construe or interpret this Agreement.
9.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.9 Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of
Common Stock of the Company, then, upon the occurrence of any
subdivision, combination or stock dividend of Common Stock, the
specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on
the outstanding shares of such class or series of stock by such
subdivision, combination or stock dividend.
3.27
9.10 Competition. Nothing set forth herein, or in the
Purchase Agreement or Warrant, shall be deemed to preclude, limit
or restrict the Company's or the Investor's ability to compete
with the other.
[The remainder of this page is intentionally left blank.]
3.28
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
STANDARD MICROSYSTEMS INTEL CORPORATION
CORPORATION
By: _______________________ By: _______________________
Name: _____________________ Name: _____________________
Title: ____________________ Title: ____________________
[Signature Page to Investor Rights Agreement]
