SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
STANDARD MICROSYSTEMS CORPORATION
(Name of Issuer)
Common Stock
(Title of Class of Securities)
853626-10-9
(CUSIP Number)
Peter N. Detkin
Acting General Counsel and Director of Litigation
Intel Corporation
2200 Mission College Boulevard
Santa Clara, CA 95052
Telephone: (408) 765-8080
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 18, 1997
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-1
(b)(3) or (4), check the following box [ ].
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act.
<PAGE> Schedule 13D Page 2 of 14 Pages
1. NAME OF REPORTING PERSON Intel
Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE 94-1672743
PERSON
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) [ ]
GROUP (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF 7. SOLE VOTING POWER 3,085,112
SHARES
BENEFICIALLY 8. SHARED VOTING POWER N/A
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 3,085,112
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER N/A
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 3,085,112
REPORTING PERSON
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 18.2%
(11)
14. TYPE OF REPORTING PERSON CO
<PAGE> Schedule 13D Page 3 of 14 Pages
Item 1. Security and Issuer.
(a) Name and Address of Principal Executive Offices
of Issuer:
Standard Microsystems Corporation
80 Arkay Drive
Hauppauge, New York 11788
(b) Title and Class of
Equity Securities: Common Stock
Item 2. Identity and Background
(a) Name of Person Filing: Intel Corporation
The executive
officers and
directors of Intel
Corporation are set
forth on Appendix A
hereto.
(b) State of Incorporation: Delaware
(c) Principal Business: Manufacturer of
microcomputer
components, modules
and systems
(d) Address of Principal Business and Principal
Office:
2200 Mission College Boulevard
Santa Clara, CA 95052-8119
(e) Criminal Proceedings:
During the last five years neither the
Reporting Person nor any officer or director of
the Reporting Person has been convicted in any
criminal proceeding.
(f) Civil Proceedings:
During the last five years neither the
Reporting Person nor any officer or director of
the Reporting Person has been party to any
civil proceeding of a judicial or
administrative body of competent jurisdiction
as a result of which such person would have
been subject to any judgment, decree or final
order enjoining future violations of or
prohibiting or mandating activities subject to
Federal or State securities laws or finding any
violation with respect to such laws.
<PAGE> Schedule 13D Page 4 of 14 Pages
Item 3. Source and Amount of Funds or Other Consideration.
Funds for the purchase of the securities are derived
from the Reporting Person's working capital.
$14,653,807 was paid to acquire 1,542,506 shares of
Common Stock of the Issuer. Additional amounts, which
vary depending on the date of exercise, will be paid
should the Reporting Person exercise the Warrant (as
defined in Item 4).
Item 4. Purpose of the Transaction
The Reporting Person acquired the Common Stock and the
Warrant (as described in Item 5(c), below) as an
investment and in connection with a technology
agreement between the Issuer and the Reporting Person
pursuant to which the Issuer and Reporting Person will
work cooperatively on the integration of new
semiconductor input/output (I/O) integrated circuits
into selected personal computer motherboard designs
and also on a family of proprietary low-pin-count I/O
devices for future applications. In addition to the
1,542,506 shares of Common Stock of the Issuer
acquired by the Reporting Person, the Reporting Person
also acquired a warrant (the "Warrant") to purchase up
to 1,542,606 shares of Common Stock of the Issuer.
The shares of Common Stock subject to the Warrant are
vested and immediately exercisable . The exercise
price for the shares increases periodically throughout
the time that the Warrant is in effect, pursuant to a
schedule set forth in the Warrant. The Warrant
expires on March 18, 2000.
Item 5. Interests in Securities of the Issuer.
(a) Number of Shares 3,085,112 shares*
Beneficially Owned:
Right to Acquire: 1,542,606 shares*
Percent of Class: 18.2%* (based upon
16,968,569 shares* of
common stock
outstanding, determined
from representations
made by the Issuer to
the Reporting Person in
connection with the
closing under the
Purchase Agreement (as
defined below)
- -----------------------
* Includes the additional shares (up to 1,542,606) of Common
Stock that the Reporting Person has a right to acquire pursuant
to the Warrant (as defined and described in Item 4). Such
shares are beneficially owned by the Reporting Person under Rule
13d-3 because the Reporting Person has a right to acquire such
shares within the next 60 days.
<PAGE> Schedule 13D Page 5 of 14 Pages
(b) Sole Power to Vote,
Direct the Vote of, or
Dispose of Shares: 3,085,112 shares*
Shared Power to Vote,
Direct the Vote of, or
Dispose of Shares: None
(c) Recent Transactions:
On March 18, 1997, pursuant to the terms of
that certain Common Stock and Warrant Purchase
Agreement dated as of March 18, 1997 (the
"Purchase Agreement"), the Reporting Person
purchased (i) 1,542,506 newly issued shares of
Common Stock of the Issuer at a price per share
of $9.50, and (ii) the Warrant to purchase up
to 1,542,606 shares of Common Stock. See the
Purchase Agreement and the Warrant, each of
which has been filed as an Exhibit hereto, for
additional details.
(d) Rights with Respect to Dividends or
Sales Proceeds: N/A
(e) Date of Cessation of Five Percent
Beneficial Ownership: N/A
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the
Issuer.
Pursuant to the Investor Rights Agreement between the
Reporting Person and the Issuer, the Reporting Person
has, under certain circumstances, various rights
related to (a) registration of the Common Stock that
the Reporting Person owns, (b) participation in future
sales and issuances of securities by the Issuer, (c)
maintaining its ownership percentage in the Issuer,
(d) receiving various public filings directly from the
Issuer on a periodic basis, and (e) the opportunity to
acquire the Issuer or certain assets of the Issuer if
the Issuer seeks other offers or receives certain
unsolicited offers. The Reporting Person has certain
standstill obligations relating to its acquisition of
shares of Common Stock of the Issuer and certain
restrictions on its voting rights. The Purchase
Agreement also contains certain restrictions on
transfer of the Common Stock by the Reporting Person.
See the Investor Rights Agreement, attached as an
Exhibit hereto, for a further description of these
provisions.
- -----------------------
* Includes the additional shares (up to 1,542,606) of Common
Stock that the Reporting Person has a right to acquire pursuant
to the Warrant (as defined and described in Item 4). Such
shares are beneficially owned by the Reporting Person under Rule
13d-3 because the Reporting Person has a right to acquire such
shares within the next 60 days.
<PAGE> Schedule 13D Page 6 of 14 Pages
Item 7. Material to Be Filed as Exhibits.
Exhibit 1 Standard Microsystems Corporation Common
Stock and Warrant Purchase Agreement,
dated March 18, 1997, between Standard
Microsystems Corporation and Intel
Corporation.
Exhibit 2 Warrant to Purchase Shares of Common
Stock of Standard Microsystems
Corporation, dated March 18, 1997.
Exhibit 3 Standard Microsystems Corporation
Investor Rights Agreement, dated March
18, 1997, between Standard Microsystems
Corporation and Intel Corporation.
Exhibit 4 Press Release of Standard Microsystems
Corporation, dated March 18, 1997.
Exhibit 5 Signature Authority
<PAGE> Schedule 13D Page 7 of 14 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated as of March 27, 1997.
INTEL CORPORATION
/s/Peter N. Detkin
By: Peter N. Detkin
Acting General counsel
and Director of Litigation
<PAGE> Schedule 13D Page 8 of 14 Pages
APPENDIX A
DIRECTORS
The following is a list of all Directors of Intel Corporation and
certain other information with respect to each Director. All
Directors are United States citizens.
Name: Craig R. Barrett
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Executive Vice President and Chief Operating
Occupation: Officer of Intel Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
Name: Winston H. Chen
Business Paramitas Foundation, 3945 Freedom Circle,
Address: Suite 760, Santa Clara, CA 95054
Principal Chairman of Paramitas Foundation
Occupation:
Name, principal Paramitas Foundation, a charitable foundation.
business and 3945 Freedom Circle, Suite 760
address of Santa Clara, CA 95054
corporation or
other
organization on
which employment
is conducted:
<PAGE> Schedule 13D Page 9 of 14 Pages
Name: Andrew S. Grove
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal President and Chief Executive Officer of Intel
Occupation: Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
Name: D. James Guzy
Business 1340 Arbor Road, Menlo Park, CA 94025
Address:
Principal Chairman of The Arbor Company
Occupation:
Name, principal The Arbor Company, a limited partnership
business and engaged in the electronics and computer
address of industry.
corporation or 1340 Arbor Road
other Menlo Park, CA 94025
organization on
which employment
is conducted:
Name: Gordon E. Moore
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Chairman of the Board of Intel Corporation
Occupation:
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
<PAGE> Schedule 13D Page 10 of 14 Pages
Name: Max Palevsky
Business 924 Westwood Boulevard, Suite 700, Los Angeles
Address: CA 90024
Principal Industrialist
Occupation:
Name, principal Self-employed.
business and
address of
corporation or
other
organization on
which employment
is conducted:
Name: Arthur Rock
Business One Maritime Plaza, Suite 1220, San Francisco,
Address: CA 94111
Principal Venture Capitalist
Occupation:
Name, principal Arthur Rock and Company, a venture capital
business and firm.
address of One Maritime Plaza, Suite 1220
corporation or San Francisco, CA 94111
other
organization on
which employment
is conducted:
Name: Jane E. Shaw
Business c/o Intel Corporation, 2200 Mission College
Address: Boulevard, Santa Clara, CA 95052
Principal Founder of The Stable Network, a
Occupation: biopharmaceutical consulting company
Name, principal c/o Intel Corporation
business and 2200 Mission College Boulevard
address of Santa Clara, CA 95052
corporation or
other
organization on
which employment
is conducted:
<PAGE> Schedule 13D Page 11 of 14 Pages
Name: Leslie L. Vadasz
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Senior Vice President, Director, Corporate
Occupation: Business Development, Intel Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
Name: David B. Yoffie
Business Harvard Business School, Soldiers Field Park 1-
Address: 411, Boston, MA 92163
Principal Max and Doris Starr Professor of International
Occupation: Business Administration
Name, principal Harvard Business School, an educational
business and institution.
address of Harvard Business School
corporation or Soldiers Field Park 1-411
other Boston, MA 92163
organization on
which employment
is conducted:
Name: Charles E. Young
Business 405 Hilgard Avenue, Los Angeles, CA 90024
Address:
Principal Chancellor
Occupation:
Name, principal University of California at Los Angeles, an
business and educational institution.
address of 405 Hilgard Avenue
corporation or Los Angeles, CA 90024
other
organization on
which employment
is conducted:
<PAGE> Schedule 13D Page 12 of 14 Pages
EXECUTIVE OFFICERS
The following is a list of all executive officers of Intel
Corporation excluding executive officers who are also directors.
Unless otherwise indicated, each officer's business address is
2200 Mission College Boulevard, Santa Clara, CA 95052-8119, which
address is Intel Corporation's business address. All executive
officers are United States citizens.
Name: Frank C. Gill
Title: Executive Vice President; General Manager, Internet
and Communications Group
Address: 5200 N.E. Elam Young Parkway, Hillsboro, OR 97124-
6497
Name: Paul S. Otellini
Title: Executive Vice President; Director, Sales and
Marketing Group
Name: Gerhard H. Parker
Title: Executive Vice President, General Manager, Technology
and Manufacturing Group
Name: Ronald J. Whittier
Title: Senior Vice President; General Manager, Content Group
Name: Albert Y. C. Yu
Title: Senior Vice President; General Manager,
Microprocessor Products Group
Name: Michael A. Aymar
Title: Vice President; General Manager, Desktop Products
Group
Name: Andy D. Bryant
Title: Vice President and Chief Financial Officer
Name: G. Carl Everett, Jr.
Title: Senior Vice President, General Manager, Desktop
Products Group
Name: F. Thomas Dunlap, Jr.
Title: Vice President, General Counsel and Secretary
Name: Patrick P. Gelsinger
Title: Vice President, General Manager, Desktop Products
Group
Address: 5200 N.E. Elam Young Parkway, Hillsboro, OR 97124-
6497
Name: John H. F. Miner
Title: Vice President, General Manager, Enterprise Server
Group
Address: 5200 N.E. Elam Young Parkway, Hillsboro, OR 97124-
6497
<PAGE> Schedule 13D Page 13 of 14 Pages
Name: Stephen P. Nachtsheim
Title: Vice President; General Manager, Mobile/Handheld
Products Group
Name: Ronald J. Smith
Title: Vice President, General Manager, Computing
Enhancement Group
<PAGE> Schedule 13D Page 14 of 14 Pages
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Document Page
Exhibit 1 Standard Microsystems Corporation 1.1
Common Stock and Warrant Purchase
Agreement, dated March 18, 1997,
between Standard Microsystems
Corporation and Intel Corporation.
Exhibit 2 Warrant to Purchase Shares of Common 2.1
Stock of Standard Microsystems
Corporation, dated March 18, 1997.
Exhibit 3 Standard Microsystems Corporation 3.1
Investor Rights Agreement, dated
March 18, 1997, between Standard
Microsystems Corporation and Intel
Corporation.
Exhibit 4 Press Release of Standard 4.1
Microsystems Corporation, dated
March 18, 1997.
Exhibit 5 Signature Authority 5.1
EXHIBIT 1
<PAGE> 1.1
STANDARD MICROSYSTEMS CORPORATION
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
This Common Stock and Warrant Purchase 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
-------------
WHEREAS, the Company desires to sell to the Investor, and the
Investor desires to purchase from the Company, shares of the
Company's Common Stock and a Warrant to purchase additional
shares of the Company's Common Stock on the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recital, the
mutual promises hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. The Company's Board of Directors has
authorized the issuance, pursuant to the terms and conditions of
this Agreement, of up to 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 (as defined below)
minus 100 shares ("Purchased Shares") PLUS 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
("Warrant Shares").
1.2 Agreement to Purchase and Sell Common Stock. The
Company hereby agrees to sell to the Investor at the Closing, and
the Investor agrees to purchase from the Company at the Closing,
the Purchased Shares at a price per share equal to the Per Share
Purchase Price.
1.3 Per Share Purchase Price. The "Per Share Purchase
Price" shall be Nine Dollars and Fifty Cents ($9.50) (subject to
adjustment for stock splits, stock dividends and similar events).
1.4 Agreement to Purchase and Sell Warrant. The Company
hereby agrees to issue to the Investor at the Closing a Warrant
(the "Warrant") to purchase the Warrant Shares in the form
attached hereto as Exhibit A.
<PAGE> 1.2
2 CLOSING
2.1 The Closing. The purchase and sale of the Purchased
Shares and the Warrant will take place at the offices of Gibson,
Dunn & Crutcher, 1 Montgomery Street, Telesis Tower, Suite 3100,
San Francisco, California, at 10:00 a.m. California time, within
three (3) business days after the conditions set forth in
Articles 5 and 6 have been satisfied, or at such other time and
place as the Company and the Investor mutually agree upon (which
time and place are referred to in this Agreement as the
"Closing"). At the Closing, the Company will deliver to the
Investor the Warrant and a certificate representing the Purchased
Shares, all against delivery to the Company by the Investor of
the full purchase price of the Purchased Shares, paid by wire
transfer of funds to the Company.
3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investor that the
statements in this Section 3 are true and correct, except as set
forth in the Disclosure Letter from the Company dated March 18,
1997 (the "Disclosure Letter").
3.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
corporate power and authority required to (a) carry on its
business as presently conducted, and (b) enter into this
Agreement, the Investor Rights Agreement (as defined in Section
5.8) and the Warrant, and to consummate the transactions
contemplated hereby and thereby. The Company is qualified to do
business and is in good standing in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
As used in this Agreement, "Material Adverse Effect" means a
material adverse effect on, or a material adverse change in, or a
group of such effects on or changes in, the business, operations,
financial condition, results of operations, prospects, assets or
liabilities of the Company.
3.2 Capitalization. As of the date of this Agreement the
capitalization of the Company is as follows:
(a) Preferred Stock. A total of 1,000,000 authorized
shares of Preferred Stock, $0.10 par value per share (the
"Preferred Stock"), none of which is issued or outstanding.
(b) Common Stock. A total of 30,000,000 authorized
shares of Common Stock, $0.10 par value per share (the "Common
Stock"), of which 13,883,457 shares are issued and outstanding.
All of such outstanding shares are validly issued, fully paid and
non-assessable. No such outstanding shares were issued in
violation of any preemptive right.
(c) Options, Warrants, Reserved Shares. Except as set
forth in the Disclosure Letter, there are not outstanding any
options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Except for any stock
repurchase rights of the Company under the Plans, no shares of
the Company's outstanding capital stock, or stock
<PAGE> 1.3
issuable upon exercise, conversion or exchange of any outstanding
options, warrants or rights, or other stock issuable by the
Company, are subject to any rights of first refusal or other
rights to purchase such stock (whether in favor of the Company or
any other person), pursuant to any agreement, commitment or other
obligation of the Company.
3.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, association or
other entity.
3.4 Due Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary
for the authorization, execution, delivery of, and the
performance of all obligations of the Company under, this
Agreement, the Investor Rights Agreement (as defined below), and
the Warrant, and the authorization, issuance, reservation for
issuance and delivery of all of the Purchased Shares being sold
under this Agreement and of the Warrant Shares has been taken or
will be taken prior to the Closing, and this Agreement
constitutes, and the Investor Rights Agreement and the Warrant
when executed, will constitute, valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as may be limited
by (i) applicable bankruptcy, insolvency, reorganization or
others laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
3.5 Valid Issuance of Stock.
(a) The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the
consideration provided for herein, will be duly and validly
issued, fully paid and nonassessable. The Warrant Shares have
been duly and validly reserved for issuance and, upon issuance,
sale and delivery in accordance with the terms of the Warrant for
the consideration provided for therein, will be duly and validly
issued, fully paid and nonassessable.
(b) Assuming the correctness of the representations
made by the Investor in Section 4 hereof, the Purchased Shares,
the Warrant and (assuming no change in applicable law and no
unlawful distribution of Purchased Shares or the Warrant by the
Investor) the Warrant Shares will be issued in full compliance
with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "1933 Act"), or in
compliance with applicable exemptions therefrom, and the
registration and qualification requirements of all applicable
securities laws of the states of the United States.
3.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in
connection with the consummation of the transactions contemplated
by this Agreement, except for the filing of such qualifications
or filings under the 1933 Act and the regulations thereunder and
all applicable state securities laws as may be required in
connection with the transactions contemplated by this
<PAGE> 1.4
Agreement. All such qualifications and filings will, in the case
of qualifications, be effective on the Closing and will, in the
case of filings, be made within the time prescribed by law.
3.7 Non-Contravention. The execution, delivery and
performance of this Agreement, the Investor Rights Agreement and
the Warrant by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby, do not and
will not (i) contravene or conflict with the Certificate of
Incorporation or Bylaws of the Company; (ii) constitute a
violation of any provision of any federal, state, local or
foreign law binding upon or applicable to the Company; or (iii)
constitute a default or require any consent under, give rise to
any right of termination, cancellation or acceleration of, or to
a loss of any benefit to which the Company is entitled under, or
result in the creation or imposition of any lien, claim or
encumbrance on any assets of the Company under, any contract to
which the Company is a party or any permit, license or similar
right relating to the Company or by which the Company may be
bound or affected in such a manner as, together with all other
such matters, would have Material Adverse Effect.
3.8 Litigation. There is no action, suit, proceeding,
claim, arbitration or investigation ("Action") pending: (a)
against the Company, its activities, properties or assets or, to
the best of the Company's knowledge, against any officer,
director or employee of the Company in connection with such
officer's, director's or employee's relationship with, or actions
taken on behalf of, the Company, (b) that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this
Agreement, the Investor Rights Agreement or the Warrant. There
is no Action pending or, to the best of the Company's knowledge,
threatened, or any basis therefor, relating to the current or
prior employment of any of the Company's current or former
employees or consultants, their use in connection with the
Company's business of any information, technology or techniques
allegedly proprietary to any of their former employers, clients
or other parties, or their obligations under any agreements with
prior employers, clients or other parties. The Company is not a
party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency
or instrumentality. No Action by the Company is currently
pending nor does the Company intend to initiate any Action which
is reasonably likely to have a Material Adverse Effect.
3.9 Invention Assignment and Confidentiality Agreement. To
the best knowledge of the Company, each employee and consultant
or independent contractor of the Company whose duties include the
development of products or Intellectual Property (as defined
below), and each former employee and consultant or independent
contractor whose duties included the development of products or
Intellectual Property, has entered into and executed an invention
assignment and confidentiality agreement in customary form or an
employment or consulting agreement containing substantially
similar terms.
3.10 Intellectual Property.
(a) Ownership or Right to Use. The Company has sole
title to and owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents or patent applications,
software, know-how, registered or unregistered trademarks and
service marks and
<PAGE> 1.5
any applications therefor, registered or unregistered copyrights,
trade names, and any applications therefor, trade secrets or
other confidential or proprietary information ("Intellectual
Property") necessary to enable the Company to carry on its
business as currently conducted, except where any deficiency
therein would not have a Material Adverse Effect. The Company
represents and warrants that it will, where the Company, in the
exercise of reasonable judgment deems it appropriate, use
reasonable business efforts to seek copyright and patent
registration, and other appropriate intellectual property
protection, for Intellectual Property of the Company.
(b) Licenses; Other Agreements. The Company is not
currently subject to any exclusive licenses (whether such
exclusivity is temporary or permanent) to any material portion of
the Intellectual Property of the Company. To the best of the
Company's knowledge, there are not outstanding any licenses or
agreements of any kind relating to any Intellectual Property of
the Company, except for agreements with OEM's and other customers
of the Company entered into in the ordinary course of the
Company's business. The Company is not obligated to pay any
royalties or other payments to third parties with respect to the
marketing, sale, distribution, manufacture, license or use of any
Intellectual Property, except as the Company may be so obligated
in the ordinary course of its business or as disclosed in the
Company's SEC Documents (as defined below).
(c) No Infringement. The Company has not violated or
infringed and is not currently violating or infringing, and the
Company has not received any communications alleging that the
Company (or any of its employees or consultants) has violated or
infringed, any Intellectual Property of any other person or
entity, to the extent that any such violation or infringement,
either individually or together with all other such violations
and infringements, would have a Material Adverse Effect.
(d) Employees and Consultants. To the best of the
Company's knowledge, no employee of or consultant to the Company
is in default under any term of any employment contract,
agreement or arrangement relating to Intellectual Property of the
Company or any non-competition arrangement, other contract, or
any restrictive covenant relating to the Intellectual Property of
the Company. The Intellectual Property of the Company (other
than any Intellectual Property duly acquired or licensed from
third parties) was developed entirely by the employees of or
consultants to the Company during the time they were employed or
retained by the Company, and to the best knowledge of the
Company, at no time during conception or reduction to practice of
such Intellectual Property of the Company were any such employees
or consultants operating under any grant from a government entity
or agency or subject to any employment agreement or invention
assignment or non-disclosure agreement or any other obligation
with a third party that would materially and adversely affect the
Company's rights in the Intellectual Property of the Company.
Such Intellectual Property of the Company does not, to the best
knowledge of the Company, include any invention or other
intellectual property of such employees or consultants made prior
to the time such employees or consultants were employed or
retained by the Company nor any intellectual property of any
previous employer of such employees or consultants nor the
intellectual property of any other person or entity.
<PAGE> 1.6
3.11 Compliance with Law and Charter Documents. The Company
is not in violation or default of any provisions of its
Certificate of Incorporation or Bylaws, both as amended, and
except for any violations that would not, either individually or
in the aggregate, have a Material Adverse Effect. The Company
has complied and is in compliance with all applicable statutes,
laws, and regulations and executive orders of the United States
of America and all states, foreign countries and other
governmental bodies and agencies having jurisdiction over the
Company's business or properties.
3.12 Registration Rights. Except as provided in the
Investor Rights Agreement effective upon the Closing, the Company
is not currently subject to any grant or agreement to grant to
any person or entity any rights (including piggyback registration
rights) to have any securities of the Company registered with the
United States Securities and Exchange Commission ("SEC") or any
other governmental authority.
3.13 Title to Property and Assets. The properties and
assets of the Company are owned by the Company free and clear of
all mortgages, deeds of trust, liens, charges, encumbrances and
security interests except for statutory liens for the payment of
current taxes that are not yet delinquent and liens, encumbrances
and security interests that arise in the ordinary course of
business and do not affect material properties and assets of the
Company. With respect to the property and assets it leases, the
Company is in compliance with such leases in all material
respects.
3.14 SEC Documents.
(a) The Company has furnished to the Investor prior to
the date hereof copies of its Annual Report on Form 10-K for the
fiscal year ended February 29, 1996 ("Form 10-K"), its Quarterly
Reports or Form 10-Q for the fiscal quarters ended August 31,
1996 and November 30, 1996 (the "Form 10-Q's"), and all other
registration statements, reports and proxy statements filed by
the Company with the Securities and Exchange Commission
("Commission") on or after February 29, 1996 (the Form 10-K, the
10-Q's and such registration statements, reports and proxy
statements, are collectively referred to herein as the "SEC
Documents"). Each of the SEC Documents, as of the respective
date thereof, did not, and each of the registration statements,
reports and proxy statements filed by the Company with the
Commission after the date hereof and prior to the Closing will
not, as of the date thereof, contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The
Company is not a party to any material contract, agreement or
other arrangement which was required to have been filed as an
exhibit to the SEC Documents that is not so filed.
(b) The Company has provided the Investor with its
audited financial statements (the "Audited Financial Statements")
for the fiscal year ended February 29, 1996, and its unaudited
financial statements for the 9-month period ended November 30,
1996 (the "Balance Sheet Date"). Since the Balance Sheet Date,
the Company has duly filed with the Commission all registration
statements, reports and proxy statements required to be filed by
it
<PAGE> 1.7
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the 1933 Act. The audited and unaudited
consolidated financial statements of the Company included in the
SEC Documents filed prior to the date hereof fairly present, in
conformity with generally accepted accounting principles ("GAAP")
(except as permitted by Form 10-Q) applied on a consistent basis
(except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its
consolidated subsidiaries as at the date thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject to normal year and audit adjustments
in the case of unaudited interim financial statements).
(c) Except as and to the extent reflected or reserved
against in the Company's Audited Financial Statements (including
the notes thereto), the Company has no material liabilities
(whether accrued or unaccrued, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined or determinable) other
than: (i) liabilities incurred in the ordinary course of
business since the Balance Sheet Date that are consistent with
the Company's past practices, (ii) liabilities with respect to
agreements to which the Investor is a party, and (iii) other
Liabilities that either individually or in the aggregate, would
not result in a Material Adverse Effect.
3.15 Absence of Certain Changes Since Balance Sheet Date.
Since the Balance Sheet Date, the business and operations of the
Company have been conducted in the ordinary course consistent
with past practice, and there has not been:
(a) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Company with
respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any
subsidiary of the Company of any outstanding shares of the
Company's capital stock;
(b) any damage, destruction or loss, whether or not
covered by insurance, except for such occurrences that have not
resulted, and are not expected to result, in a Material Adverse
Effect;
(c) any waiver by the Company of a valuable right or
of a material debt owed to it, except for such waivers that have
not resulted, and are not expected to result, in a Material
Adverse Effect;
(d) any material change or amendment to, or any waiver
of any material rights under, a material contract or arrangement
by which the Company or any of its assets or properties is bound
or subject, except for changes, amendments, or waivers that are
expressly provided for or disclosed in this Agreement or that
have not resulted, and are not expected to result, in a Material
Adverse Effect;
(e) any change by the Company in its accounting
principles, methods or practices or in the manner it keeps its
accounting books and records, except any such change required by
a change in GAAP; and
<PAGE> 1.8
(f) any other event or condition of any character,
except for such events and conditions that have not resulted, and
are not expected to result, either individually or collectively,
in a Material Adverse Effect.
3.16 Employee Benefits.
(a) As used in this Section 3.16, the following terms
have the following meanings: (1) "Benefit Arrangement" means any
material benefit arrangement that is not an Employee Benefit
Plan, including (i) each material employment or consulting
agreement, (ii) each material arrangement providing for insurance
coverage or workers' compensation benefits, (iii) each material
bonus or deferred bonus arrangement, (iv) each material
arrangement providing any termination allowance, severance or
similar benefits, (v) each equity compensation plan, (vi) each
deferred compensation plan and (vii) each material compensation
policy and practice maintained by the Company covering the
employees, former employees, officers, former officers, directors
and former directors of the Company, and the beneficiaries of any
of them; (2) "Benefit Plan" means an Employee Benefit Plan or
Benefit Arrangement; (3)"COBRA" means the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, as set forth in
Section 4980B of the Code and Part 6 of Title I of ERISA; (4)
"Employee Benefit Plan" means any employee benefit plan, as
defined in Section 3(3) of ERISA, that is sponsored or
contributed to by the Company or any ERISA Affiliate covering
employees or former employees of the Company; (5) "Employee
Pension Benefit Plan" means any employee pension benefit plan, as
defined in Section 3(2) of ERISA, that is regulated under Title
IV of ERISA, other than a Multiemployer Plan; (6) "ERISA" means
the Employee Retirement Income Security Act of 1974, as amended;
(7) "ERISA Affiliate" of the Company means any other person or
entity that, together with the Company as of the relevant
measuring date under ERISA, was or is required to be treated as a
single employer under Section 414 of the Code; (8)"Group Health
Plan" means any group health plan, as defined in Section
5000(b)(l) of the Code; (9) "Multiemployer Plan" means a
multiemployer plan, as defined in Section 3(37) and 4001(a)(3) of
ERISA; and (10) "Prohibited Transaction" means a transaction that
is prohibited under Section 4975 of the Code or Section 406 of
ERISA and not exempt under Section 4975 of the Code or Section
408 of ERISA, respectively.
(b) Neither the Company nor any of its ERISA
Affiliates sponsors or has sponsored, maintained, contributed to,
or incurred an obligation to contribute to, any Employee Pension
Benefit Plan (whether or not terminated). Neither the Company
nor any of its ERISA Affiliates sponsors or has sponsored,
maintained, contributed to, or incurred an obligation to
contribute to, any Multiemployer Plan (whether or not
terminated).
(c) No Employee Benefit Plan has participated in,
engaged in or been a party to any Prohibited Transaction, and
neither the Company nor any of its ERISA Affiliates has had
asserted against it any claim for any material tax or material
penalty imposed under ERISA or the Code with respect to any
Employee Benefit Plan nor, to the best of the Company's
knowledge, is there a basis for any such claim. To the best of
the Company's knowledge, no officer, director or employee of the
Company has committed a material breach of any
<PAGE> 1.9
responsibility or obligation imposed upon fiduciaries by Title I
of ERISA with respect to any Employee Benefit Plan, with respect
to which breach the Company is directly or indirectly liable.
(d) Other than routine claims for benefits, there is
no material claim pending involving any Benefit Plan by any
Person against such plan or the Company or any ERISA Affiliate,
nor, to the best of the Company's knowledge, is any such material
claim threatened. There is no pending, or to the best of the
Company's knowledge, threatened Proceeding involving any Employee
Benefit Plan before the IRS, the United States Department of
Labor or any other governmental authority.
(e) No material violation of any reporting or
disclosure requirement imposed by ERISA or the Code exists with
respect to any Employee Benefit Plan.
(f) Each Benefit Plan has been maintained in all
material respects, by its terms and in operation, in accordance
with ERISA (if applicable), the Code and all other applicable
federal, state, local and foreign laws. The Company and its
ERISA Affiliates have made full and timely payment of all amounts
required to be (i) contributed under the terms of each Benefit
Plan and such laws, or (ii) required to be paid as expenses under
such Benefit Plan. Each Employee Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has
received a favorable determination letter with respect to such
qualified status from the IRS or has filed a request for such a
determination letter with the IRS within the remedial amendment
period such that such determination of qualified status will
apply from and after the effective date of any such Employee
Benefit Plan.
(g) With respect to any Group Health Plans maintained
by the Company or its ERISA Affiliates, whether or not for the
benefit of the Company's employees, the Company and its ERISA
Affiliates have complied in all material respects with the
provisions of COBRA.
(h) Except pursuant to the provisions of COBRA,
neither the Company nor any ERISA Affiliate maintains any
Employee Benefit Plan that provides benefits described in Section
3(1) of ERISA for any former employees or retirees, or the
beneficiaries of any of them, of the Company or its ERISA
Affiliates.
3.17 Tax Matters.
(a) All deficiencies asserted or assessments made as a
result of any examinations by the Internal Revenue Service or any
state, local or foreign taxing authority have been fully paid, or
are fully reflected as a liability in the Audited Financial
Statements. The Company has filed on a timely basis all Tax
Returns required to have been filed by it and has paid on a
timely basis all Taxes required to be shown thereon as due. All
such Tax Returns are true, complete and correct in all material
respects. The provisions for taxes in the Audited Financial
Statements have been determined in accordance with GAAP. No
liability for Taxes has been incurred by the Company since the
Balance Sheet Date other than in the ordinary course of its
business. No director, officer or employee of the Company having
responsibility for Tax matters has reason to believe that any
Taxing authority has valid grounds to claim or assess any
<PAGE> 1.10
additional Tax with respect to the Company in excess of the
amounts shown in the Audited Financial Statements for the periods
covered thereby. As used in this Agreement, (l) "Taxes" means
(x) all federal, state, local and other net income, gross income,
gross receipts, sales use, ad valorem, value added, intangible,
unitary, capital gain, transfer, franchise, profits, license,
lease, service, service use, withholding, backup withholding,
payroll, employment, estimated, excise, severance, stamp,
occupation, premium, property, prohibited transactions, windfall
or excess profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional
amounts with respect thereto, (y) any liability for payment of
amounts described in clause (x) whether as a result of transferee
liability, of being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through
operation of law and (z) any liability for the payment of amounts
described in clauses (x) or (y) as a result of any tax sharing,
tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person for Taxes; and
the term "Tax" means any one of the foregoing Taxes; and (2) "Tax
Returns" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
(b) With respect to all amounts in respect of Taxes
imposed upon the Company, or for which the Company is or could be
liable, whether to taxing authorities (as, for example, under
law) or to other persons or entities (as, for example, under tax
allocation agreements), and with respect to all taxable periods
or portions of periods ending on or before the Closing Date, all
applicable Tax laws and agreements have been fully complied with,
and all such amounts required to be paid by the Company to taxing
authorities or others have been paid.
(c) The Company has not received notice that the
Internal Revenue Service or any other taxing authority has
asserted against the Company any deficiency or claim for
additional Taxes in connection with any Tax Return, and no issues
have been raised (and are currently pending) by any taxing
authority in connection with any Tax Return. The Company has not
received notice that it is or may be subject to Tax in a
jurisdiction in which it has not filed or does not currently file
Tax Returns.
3.18 Labor Agreements and Actions.
(a) No collective bargaining agreement exists that is
binding on the Company, and no petition has been filed or
proceedings instituted by an employee or group of employees with
any labor relations board seeking recognition of a bargaining
representative. To the best of the Company's knowledge, no
organizational effort is currently being made or threatened by or
on behalf of any labor union to organize any employees of the
Company.
(b) There is no labor strike, dispute, slow down or
stoppage pending or threatened against or directly affecting the
Company. No grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is pending, and no
claims therefor exist. The Company has not received any notice,
and has no knowledge of any threatened labor or civil rights
dispute, controversy or grievance or any other unfair labor
practice proceeding or
<PAGE> 1.11
breach of contact claim or action with respect to claims of, or
obligations to, any employee or group of employees of the
Company.
(c) All individuals who are performing or have
performed services for the Company and are or were classified by
the Company as "independent contractors" qualify for such
classification under Section 530 of the Revenue Act of 1978 or
Section 1706 of the Tax Reform Act of 1986, as applicable, except
for such instances which would not, in the aggregate, have a
Material Adverse Effect.
3.19 Real Property Holding Corporation Status. Since its
inception the Company has not been a "United States real property
holding corporation", as defined in Section 897(c)(2) of the U.S.
Internal Revenue Code of 1986, as amended, and in Section 1.897-
2(b) of the Treasury Regulations issued thereunder (the
"Regulations"), and the Company has filed with the Internal
Revenue Service all statements, if any, with its United States
income tax returns which are required under Section 1.897-2(h) of
the Regulations.
3.20 Full Disclosure. The information contained in this
Agreement and the Disclosure Letter with respect to the business,
operations, assets, results of operations and financial condition
of the Company, and the transactions contemplated by this
Agreement, the Investor Rights Agreement and the Warrant, are
true and complete in all material respects and do not omit to
state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. The Investor hereby represents and warrants to the
Company, and agrees that:
4.l Authorization. This Agreement and the Investor Rights
Agreement have been duly authorized by all necessary corporate
action on the part of the Investor. This Agreement and the
Investor Rights Agreement constitute the Investor's valid and
legally binding obligations, enforceable in accordance with their
respective terms, except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of
creditors' rights generally and (b) the effect of rules of law
governing the availability of equitable remedies. The Investor
has full corporate power and authority to enter into this
Agreement and the Investor Rights Agreement
4.2 Purchase for Own Account. The Purchased Shares and the
Warrant are being acquired for investment for the Investors own
account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the
1933 Act, and the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the
same. The Investor also represents that it has not been formed
for the specific purpose of acquiring the Purchased Shares and
the Warrant.
4.3 Disclosure of Information. The Investor has received
or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision
with respect to the Purchased Shares and the Warrant to be
purchased by the
<PAGE> 1.12
Investor under this Agreement. The Investor further has had an
opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the
Purchased Shares, the Warrant and the Warrant Shares and to
obtain additional information necessary to verify any information
furnished to the investor or to which the Investor had access.
The foregoing, however, does not in any way limit or modify the
representations and warranties made by the Company in Article 3.
4.4 Investment Experience. The Investor understands that
the purchase of the Purchased Shares and the Warrant involves
substantial risk. The Investor has experience as an investor in
securities of companies and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the
Purchased Shares and the Warrant and has such knowledge and
experience in financial or business matters that it is capable of
evaluating the merits and risks of this investment in the
Purchased Shares and the Warrant and protecting its own interests
in connection with this investment.
4.5 Accredited Investor Status. The Investor is an
"accredited investor" within the meaning of Regulation D
promulgated under the 1933 Act.
4.6 Restricted Securities. The Investor understands that
the Purchased Shares and the Warrant to be purchased by the
Investor hereunder, and any Warrant Shares to be purchased by the
Investor upon exercise of the Warrant, are characterized as
"restricted securities" under the 1933 Act inasmuch as they are
being acquired from the Company in a transaction not involving a
public offering and that under the 1933 Act and applicable
regulations thereunder such securities may be resold without
registration under the 1933 Act only in certain limited
circumstances. The Investor is familiar with Rule 144 of the
SEC, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act. The Investor
understands that the Company is under no obligation to register
any of the securities sold hereunder except as provided in the
Investor Rights Agreement.
4.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor
further agrees not to make any disposition of all or any portion
of the Purchased Shares, the Warrant or the Warrant Shares unless
and until:
(a) there is then in effect a registration statement
under the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
(b) the Investor has notified the Company of the
proposed disposition and has furnished the Company with a
statement of the circumstances surrounding the proposed
disposition, and the Investor has furnished the Company, at the
expense of the Investor or its transferee, with an opinion of
counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities
under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this
Section 4.7, no such registration statement or opinion of counsel
will be required for any transfer of any Purchased Shares, the
Warrant, or any Warrant Shares in compliance with SEC Rule 144,
Rule 144A or Rule 145(d), or
<PAGE> 1.13
any successor rule of any of the foregoing, or if such transfer
otherwise is exempt, in the view of the Company's legal counsel,
from the registration requirements of the 1933 Act.
4.8 Legends. Certificates evidencing the Purchased Shares
and the Warrant Shares will bear each of the legends set forth
below and the Warrant will bear the legends set forth in (a) and
(c) below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR
RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF
SUCH SHARES DATED AS OF MARCH 18, 1997, A COPY OF WHICH IS
AVAILABLE FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE.
(c) Any Legends required by any applicable state
securities laws.
The Legend set forth in Section 4.8(a) hereof will be removed by
the Company from any certificate evidencing Purchased Shares or
the Warrant Shares upon delivery to the Company of an opinion by
counsel, reasonably satisfactory to the Company, that a
registration statement under the 1933 Act is at that time in
effect with respect to the legended security or that such
security can be transferred in a public sale without such a
registration statement being in effect and that such transfer
will not jeopardize the exemption or exemptions from registration
pursuant to which the Company issued the Purchased Shares, the
Warrant or the Warrant Shares.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor under Sections l and 2 of this
Agreement are subject to the fulfillment or waiver, on or before
the Closing (defined in Section 2.l), of each of the following
conditions:
5.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in
Section 3 will be true and correct on and as of the date hereof
and on and as of the date of the Closing, except as set forth in
the Disclosure Letter, with the same effect as though such
representations and warranties had been made as of the Closing.
<PAGE> 1.14
5.2 Performance. The Company will have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Closing and will have
obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Compliance Certificate. The Company will have
delivered to the Investor at the Closing a certificate signed on
its behalf by its Chief Executive Officer or Chief Financial
Officer certifying that the conditions specified in Sections 5.1
and 5.2 hereof have been fulfilled.
5.4 Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this
Agreement will be exempt from the registration requirements of
the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at
the Closing and all documents incident thereto will be reasonably
satisfactory in form and substance to the Investor, and the
Investor will have received all such counterpart originals and
certified or other copies of such documents as it may reasonably
request. Such documents shall include (but not be limited to)
the following:
(a) Certified Charter Documents. A copy of (i) the
Certificate of Incorporation certified as of a recent date by the
Secretary of State of Delaware as a complete and correct copy
thereof, and (ii) the Bylaws of the Company (as amended through
the date of the Closing) certified by the Secretary of the
Company as true and correct copies thereof as of the Closing.
(b) Board Resolutions. A copy, certified by the
Secretary of the Company, of the resolutions of the Board of
Directors of the Company providing for the approval of this
Agreement and the Investor Rights Agreement and the issuance of
the Purchased Shares and the Warrant and the other matters
contemplated hereby.
5.6 Opinion of Company Counsel. The Investor will have
received an opinion on behalf of the Company, dated as of the
date of the Closing, from Loeb & Loeb L.L.P., in form and
substance reasonably satisfactory to the Investor.
5.7 Warrant and Investor Rights Agreement. The Company
will have issued the Warrant and will have executed and delivered
the Investor Rights Agreement substantially in the form attached
to this Agreement as Exhibit B (the "Investor Rights Agreement").
5.8 No Material Adverse Effect. Between the date hereof
and the Closing, there shall not have occurred any Material
Adverse Effect.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to the Investor under this Agreement
are subject to the fulfillment or waiver on or before the Closing
(defined in Section 2.1), of each of the following conditions:
<PAGE> 1.15
6.1 Representations and Warranties True. The
representations and warranties of the Investor contained in
Section 4 will be true and correct on and as of the date hereof
and on and as of the date of the Closing with the same effect as
though such representations and warranties had been made as of
the Closing.
6.2 Payment of Purchase Price. The Investor will have
delivered to the Company the full purchase price of the Purchased
Shares as specified in Section 1.2.
6.3 Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this
Agreement will be exempt from the registration requirements of
the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
6.4 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at
the Closing and all documents incident thereto will be reasonably
satisfactory in form and substance to the Company and to the
Company's legal counsel, and the Company will have received all
such counterpart originals and certified or other copies of such
documents as it may reasonably request.
6.5 Investor Rights Agreement. The Investor will have
executed and delivered the Investor Rights Agreement.
7. INDEMNIFICATION.
7.1 Agreement to Indemnify.
(a) Company Indemnity. The Investor, its Affiliates
and Associates, and each officer, director, shareholder,
employer, representative and agent of any of the foregoing
(collectively, the "Investor Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 7 by the Company with respect to any and all Damages (as
defined below) incurred by any Investor Indemnitee as a proximate
result of any inaccuracy or misrepresentation in, or breach of,
any representation, warranty, covenant or agreement made by the
Company in this Agreement, the Investor Rights Agreement or the
Warrant (including any Exhibits and Schedules hereto).
(b) Investor Indemnity. The Company, its respective
Affiliates and Associates, and each officer, director,
shareholder, employer, representative and agent of any of the
foregoing (collectively, the "Company Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 7, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a result of any inaccuracy
or misrepresentation in, or breach of, any representation,
warranty, covenant or agreement made by the Investor in this
Agreement or the Investor Rights Agreement.
(c) Equitable Relief. Nothing set forth in this
Section 7 shall be deemed to prohibit or limit any Investor
Indemnitee's or Company Indemnitee's right at any time
<PAGE> 1.16
before, on or after the Closing Date, to seek injunctive or other
equitable relief for the failure of any Indemnifying Party to
perform or comply with any covenant or agreement contained
herein.
7.2 Survival. All representations and warranties of the
Investor and the Company contained herein or in the Investor
Rights Agreement or the Warrant, and all claims of any Investor
Indemnitee or Company Indemnitee in respect of any inaccuracy or
misrepresentation in or breach thereof, shall survive the Closing
until the later of (i) the date of termination of the Right of
Participation under the Investor Rights Agreement, and (ii) the
third anniversary of the date of this Agreement, regardless of
whether the applicable statute of limitations, including
extensions thereof, may expire. All covenants and agreements of
the Investor and the Company contained herein or in the Investor
Rights Agreement or the Warrant shall survive the Closing in
perpetuity (except to the extent any such covenant or agreement
shall expire by its terms). All claims of any Investor
Indemnitee or Company Indemnitee in respect of any breach of such
covenants or agreements shall survive the Closing until the
expiration of two years following the non-breaching party's
obtaining actual knowledge of such breach.
7.3 Claims for Indemnification. If any Investor Indemnitee
or Company Indemnitee (an "Indemnitee") shall believe that such
Indemnitee is entitled to indemnification pursuant to this
Section 7 in respect of any Damages, such Indemnitee shall give
the appropriate Indemnifying Party (which for purposes hereof, in
the case of an Investor Indemnitee, means the Company, and in the
case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable
detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice
of any claim for indemnification promptly shall not adversely
affect such Indemnitee's right to indemnity hereunder except to
the extent that such failure adversely affects the right of the
Indemnifying Party to assert any reasonable defense to such
claim. Each such claim for indemnity shall expressly state that
the Indemnifying Party shall have only the twenty (20) business
day period referred to in the next sentence to dispute or deny
such claim. The Indemnifying Party shall have twenty (20)
business days following its receipt of such notice either (a) to
acquiesce in such claim by giving such Indemnitee written notice
of such acquiescence or (b) to object to the claim by giving such
Indemnitee written notice of the objection. If Indemnifying
Party does not object thereto within such twenty (20) business
day period, such Indemnitee shall be entitled to be indemnified
for all Damages reasonably and proximately incurred by such
Indemnitee in respect of such claim. If the Indemnifying Party
objects to such claim in a timely manner, the senior management
of the Company and the Investor shall meet to attempt to resolve
such dispute. If the dispute cannot be resolved by the senior
management either party may make a written demand for formal
dispute resolution and specify therein the scope of the dispute.
Within thirty days after such written notification, the parties
agree to meet for one day with an impartial mediator and consider
dispute resolution alternatives other than litigation. If an
alternative method of dispute resolution is not agreed upon
within thirty days after the one day mediation, either party may
begin litigation proceedings. Nothing in this section shall be
deemed to require arbitration.
7.4 Defense of Claims. In connection with any claim that
may give rise to indemnity under this Section 7 resulting from or
arising out of any claim or Proceeding against
<PAGE> 1.17
an Indemnitee by a person or entity that is not a party hereto,
the Indemnifying Party may but shall not be obligated to (unless
such Indemnitee elects not to seek indemnity hereunder for such
claim), upon written notice to the relevant Indemnitee, assume
the defense of any such claim or proceeding if the Indemnifying
Party with respect to such claim or Proceeding acknowledges to
the Indemnitee the Indemnitee's right to indemnity pursuant
hereto to the extent provided herein (as such claim may have been
modified through written agreement of the parties or arbitration
hereunder) and provides assurances, satisfactory to such
Indemnitee, that the Indemnifying Party will be financially able
to satisfy such claim to the extent provided herein if such claim
or Proceeding is decided adversely; provided, however, that
nothing set forth herein shall be deemed to require the
Indemnifying Party to waive any crossclaims or counterclaims the
Indemnifying Party may have against the Indemnified Party for
damages. The Indemnified Party shall be entitled to retain
separate counsel, reasonably acceptable to the Indemnifying
Party, if the Indemnified Counsel shall determine, upon the
written advice of counsel, that an actual or potential conflict
of interest exists between the Indemnifying Party and the
Indemnified Party in connection with such Proceeding. The
Indemnifying Party shall be obligated to pay the reasonable fees
and expenses of such separate counsel to the extent the
Indemnified Party is entitled to indemnification by the
Indemnifying Party with respect to such claim or Proceeding under
this Section 7.4. If the Indemnifying Party assumes the defense
of any such claim or Proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to such Indemnitee to
conduct the defense of such claim or Proceeding, shall take all
steps necessary in the defense or settlement thereof and shall at
all times diligently and promptly pursue the resolution thereof.
If the Indemnifying Party shall have assumed the defense of any
claim or Proceeding in accordance with this Section 7.4, the
Indemnifying Party shall be authorized to consent to a settlement
of, or the entry of any judgment arising from, any such claim or
Proceeding, with the prior written consent of such Indemnitee,
not to be unreasonably withheld; provided, however, that the
Indemnifying Party shall pay or cause to be paid all amounts
arising out of such settlement or judgment concurrently with the
effectiveness thereof; provided, further, that the Indemnifying
Party shall not be authorized to encumber any of the assets of
any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and provided,
further, that a condition to any such settlement shall be a
complete release of such Indemnitee and its Affiliates,
directors, officers, employees and agents with respect to such
claim, including any reasonably foreseeable collateral
consequences thereof. Such Indemnitee shall be entitled to
participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. Each Indemnitee
shall, and shall cause each of its Affiliates, directors,
officers, employees and agents to, cooperate fully with the
Indemnifying Party in the defense of any claim or Proceeding
being defended by the Indemnifying Party pursuant to this Section
7.4. If the Indemnifying Party does not assume the defense of
any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 7.4, such Indemnitee may defend against
such claim or Proceeding in such manner as it may deem
appropriate, including settling such claim or proceeding after
giving notice of the same to the Indemnifying Party, on such
terms as such Indemnitee may deem appropriate. If any
Indemnifying Party seeks to question the manner in which such
Indemnitee defended such claim or Proceeding or the amount of or
nature of any such settlement, such Indemnifying Party shall have
the burden to prove by a preponderance of the evidence that such
Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
<PAGE> 1.18
7.5 Certain Definitions. As used in this Section 7, (a)
"Affiliate" means, with respect to any person or entity, any
person or entity directly or indirectly controlling, controlled
by or under direct or indirect common control with such other
person or entity; (b) "Associate" means, when used to indicate a
relationship with any person or entity, (l) any other person or
entity of which such first person or entity is an officer,
director or partner or is, directly or indirectly, the beneficial
owner of ten percent (10%) or more of any class of equity
securities, membership interests or other comparable ownership
interests issued by such other person or entity, (2) any trust or
other estate in which such first person or entity has a ten
percent (10%) or more beneficial interest or as to which such
first person or entity serves as trustee or in a similar
fiduciary capacity, and (3) any relative or spouse of such first
person or entity who has the same home as such first person or
entity or who is a director or officer of such first person or
entity; (c) "Damages" means all demands, claims, actions or
causes of action, assessments, losses, damages, costs, expenses,
liabilities, judgments, awards, fines, response costs, sanctions,
taxes, penalties, charges and amounts paid in settlement,
including (1) interest on cash disbursements in respect of any of
the foregoing at the prime rate of Bank of America, NT & SA, as
in effect from time to time, compounded quarterly, from the date
each such cash disbursement is made until the date the party
incurring such cash disbursement shall have been indemnified in
respect thereof, and (2) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of
attorneys, accountants and other agents of, or other parties
retained by, such party), and (d) "Proceeding" means any action,
suit, hearing, arbitration, audit, proceeding (public or private)
or investigation that is brought or initiated by or against any
federal, state, local or foreign governmental authority or any
other person or entity.
8. MISCELLANEOUS.
8.1 Successors and Assigns. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon
the respective successors and assigns of the parties.
8.2 Governing Law. This Agreement will be governed by and
construed under the internal laws of the State of Delaware,
without reference to principles of conflict of laws or choice of
laws.
8.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but
all of which together will constitute one and the same
instrument.
8.4 Headings. The headings and captions used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits
and schedules will, unless otherwise provided, refer to sections
and paragraphs hereof and exhibits and schedules attached hereto,
all of which exhibits and schedules are incorporated herein by
this reference.
8.5 Notices. Any notice required or permitted under this
Agreement will be given in writing, shall be effective when
received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be
notified or three (3) business days after deposit with the United
States Post Office, by registered or certified mail, postage
prepaid,
<PAGE> 1.19
or one (1) business day after deposit with a nationally
recognized courier service such as Fedex for next business day
delivery under circumstances in which such service guarantees
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 8.5.
8.6 No Finder's Fees. Each party represents that it
neither is nor will be obligated for any finder's or broker's fee
or commission in connection with this transaction. The Investor
will indemnify and hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' or
broker's fee for which the Investor or any of its officers,
partners, employees or consultants, or representatives is
responsible. The Company will indemnify and hold harmless the
Investor from any liability for any commission or compensation in
the nature of a finder's or broker's fee for which the Company or
any of its officers, employees or consultants or representatives
is responsible.
8.7 Amendments and Waivers. This Agreement may be amended
and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the holders of Purchased Shares and/or Warrant
Shares representing at least a majority of the total aggregate
number of Purchased Shares and Warrant Shares then outstanding
(excluding any of such shares that have been sold to the public
pursuant to SEC Rule 144 or otherwise). Any amendment or waiver
effected in accordance with this Section 8.7 will be binding upon
the Investor, the Company and their respective successors and
assigns.
8.8 Severability. If any provision of this Agreement is
held to be unenforceable under applicable law, such provision
will be excluded from this Agreement and the balance of the
Agreement will be interpreted as if such provision were so
excluded and will be enforceable in accordance with its terms.
8.9 Entire Agreement. This Agreement, together with all
Exhibits and schedules hereto, constitutes the entire agreement
and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings duties or obligations
between the parties with respect to the subject matter hereof.
8.10 Further Assurances. From and after the date of this
Agreement upon the request of the Investor or the Company, the
Company and the Investor will execute and deliver such
instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
8.11 Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it shall be
deemed to mean "include, without limitation" or "including,
without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set
forth an exhaustive list.
<PAGE> 1.20
8.12 Fees, Costs and Expenses. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party
hereto in connection with the preparation, negotiation and
execution of this Agreement, the Investor Rights Agreement and
the Warrant and the consummation of the transactions contemplated
hereby and thereby (including the costs associated with any
filings with, or compliance with any of the requirements of, any
governmental authorities), shall be the sole and exclusive
responsibility of such party.
[The remainder of this page is intentionally left blank.]
<PAGE> 1.21
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
STANDARD MICROSYSTEMS INTEL CORPORATION
CORPORATION
By: _______________________ By: _______________________
Name: _____________________ Name: _____________________
Title: ____________________ Title: ____________________
Date signed: ______________ Date signed: ______________
Address: __________________ Address: __________________
__________________ __________________
__________________ __________________
Telephone No.: ____________ Telephone No.: ____________
Facsimile No.: ____________ Facsimile No.: ____________
[Signature Page to Common Stock and Warrant Purchase Agreement]
<PAGE> 1.22
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
LIST OF EXHIBITS
Exhibit A - Form of Warrant
Exhibit B - Form of Investor Rights Agreement
EXHIBIT 2
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
OF
STANDARD MICROSYSTEMS CORPORATION
<PAGE> 2.1
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
Void after 5:00 p.m.,
Pacific Time
on March 18, 2000
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
STANDARD MICROSYSTEMS CORPORATION
Initial Number of Shares: 1,542,606
Date of Grant: March 18, 1997
Expiration Date: March 18, 2000
THIS CERTIFIES THAT, for value received pursuant to that certain
Common Stock and Warrant Purchase Agreement dated as of March 18,
1997 (the "Purchase Agreement), Intel Corporation and any person
to whom the interest in this Warrant is lawfully transferred
pursuant to the terms and conditions set forth herein (the
original holder hereof and such transferees are referred to
hereinafter as the "Holder") is entitled to purchase, at any time
and from time to time after the date hereof, up to the above
number (as adjusted pursuant to Section 2 hereof) of fully paid
and nonassessable shares of the Common Stock (the "Shares") of
Standard Microsystems Corporation, a Delaware corporation (the
"Company"), at the applicable Per Share Purchase Price as set
forth in Section 1.1 hereof, subject to the provisions and upon
the terms and conditions set forth herein.
This Warrant is subject to the following terms and conditions:
1. EXERCISE.
1.1 Per Share Purchase Price. The "Per Share Purchase
Price" at which this Warrant may be exercised shall be as set
forth in the following table, subject to adjustment as provided
in Section 2 hereof:
<PAGE> 2.2
Date of Exercise Price
---------------- -----
From March 18, 1997 through March 18, 1998 $10.45
From March 18, 1998 through March 18, 1999 $11.40
From March 18, 1999 through March 18, 2000 $12.35
Notwithstanding the foregoing and subject to adjustment as
provided in Section 2 hereof, the Per Share Purchase Price at
which 309,809 Shares of this Warrant may be exercised shall be
not less than the book value per share as of February 28, 1997
(determined from the Company's balance sheet as of February 28,
1997 as contained in the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1997).
1.2 Expiration. This Warrant shall expire and be canceled
in its entirety on the Expiration Date set forth above and must
be exercised, if at all, on or before the Expiration Date
(subject only to the provisions of Section 1.6 below).
1.3 Exercise.
(a) The purchase right represented by this Warrant may
be exercised by the Holder, in whole or in part, for up to the
total number of shares then exercisable, by the surrender of this
Warrant (with the Common Stock Warrant Notice of Exercise form
attached hereto as Annex I duly executed) at the principal office
of the Company and by the payment to the Company in cash (by
certified check or wire transfer) or by surrender of shares of
Common Stock of the Company valued at their Market Price (as
defined below) on the date of surrender, or a combination of the
foregoing, in an amount equal to the then applicable Purchase
Price Per Share multiplied by the number of Shares then being
purchased.
(b) In lieu of exercising this Warrant by payment of
cash, when permitted by law and applicable regulations, the
Holder may pay such exercise price through a "same day sale"
commitment from the Holder and a broker-dealer that is a member
of the National Association of Securities Dealers (an "NASD
Dealer") whereby the Holder irrevocably elects to exercise the
Warrant and to sell a portion of the Shares so purchased to pay
for the exercise price and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the exercise price
directly to the Company.
(c) In lieu of exercising this Warrant by payment of
cash or by payment through a same day sale, the Holder may elect
to receive, without the payment by the Holder of any additional
consideration, a number of shares (rounded down to the nearest
whole share) equal to the value of this Warrant or any portion
hereof by the surrender of this Warrant or such portion to the
Company (the "Net Exercise"), with the net issue election
initialed in the Common Stock Warrant Notice of Exercise annexed
hereto duly executed, at the office of the
<PAGE> 2.3
Company. Thereupon the Company will issue to the Holder such
number of shares of Common Stock of the Company as is computed
using the following formula.
X = Y (A-B)
-------
A
where X = the number of shares of Common Stock to be issued to
the Holder upon the Net Exercise pursuant to this
Section 1.3;
Y = the number of Shares exercised under this Warrant for
which the net issue election is made pursuant to this
Section 1.3 (upon such Net Exercise, the number of
shares subject to further exercise under this Warrant
shall be reduced by this number);
A = the Market Price (as defined below) of one share of
the Company's Common Stock on the date the net issue
election is made pursuant to this Section 1.3; and
B = the Per Share Purchase Price in effect under this
Warrant on the date the net issue election is made
pursuant to this Section 1.3.
For purposes of this Section 1.3, "Market Price" means, as to a
share of Common Stock, the average of the closing prices of sales
on all domestic securities exchanges on which the Common Stock
may at the time be listed, or, if there have been no sales on any
such exchange on any 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 the Common Stock 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 the Common Stock 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, in each such case averaged over a
period of thirty (30) Trading Days immediately preceding the date
the net issue election or other exercise is made pursuant to this
Section 1.3; provided, however, that if the Common Stock is
listed on any domestic securities exchange the term "Trading
Days" as used in this sentence means days on which such exchange
is open for trading. If at any time the Common Stock is not
listed on any domestic securities exchange or quoted in the
Nasdaq National Market or the domestic over-the counter market,
the "Market Price" shall be the fair value thereof determined
jointly by the Company and the Holder; provided, however, that if
such parties are unable to reach agreement within fifteen (15)
business days following written notice from the Holder to the
Company setting forth the Holder's determination of such fair
value, such fair value shall be determined by an appraiser
jointly selected by the Company and the Holder. The
determination of such appraiser shall be final and binding on the
Company and the Holder, and the fees and expenses of such
appraiser shall be paid by the Company
1.4 Limitations on Exercise. The exercise of this Warrant,
and the issuance of the Shares will be subject to and conditioned
upon compliance by the Company and the Holder with all applicable
state and federal laws and regulations and with all applicable
requirements of
<PAGE> 2.4
any stock exchange or automated quotation system on which the
Company's common stock may be listed or quoted at the time of
such issuance or transfer. The Company shall, at its sole cost
and expense, use its reasonable best efforts to make all filings,
notices and applications required by the Company (excluding
filings, notices and applications required by the Holder), and
take all other actions necessary to permit the exercise of this
Warrant by the Holder and the issuance of the Shares to the
Holder, and the Holder shall cooperate with all reasonable
requests of the Company in connection therewith. This Warrant
may not be exercised as to fewer than 50,000 Shares unless it is
exercised as to all Shares as to which the Warrant is then
exercisable.
1.5 Issuance of New Warrant. In the event of any exercise
of the purchase right represented by this Warrant, certificates
for the Shares so purchased will be delivered to the Holder
within four (4) business days after receipt of such payment and,
unless this Warrant has been fully exercised or has expired, a
new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant will not then have been exercised
will also be issued to the Holder within a reasonable time.
1.6 Hart Scott-Rodino Compliance.
(a) The Company hereby acknowledges that the exercise
of this Warrant by Holder may subject the Company and/or the
Holder to the filing requirements of the Hart-Scott Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") and that the
Holder may be prevented from closing the exercise of this Warrant
until the expiration or early termination of all waiting periods
imposed by, and compliance with all other requirements under, the
HSR Act ("HSR Requirements"). If on or before the Expiration
Date, the Holder (i) has sent the Common Stock Warrant Notice of
Exercise to the Company, (ii) has irrevocably elected to exercise
this Warrant for the number of Shares specified in such notice
subject only to compliance with the HSR Requirements, and (iii)
the Holder has not been able to complete the exercise of this
Warrant prior to the Expiration Date solely because of the HSR
Requirements, then, for so long as the Holder actively continues
in its effort to comply with the HSR Requirements, the Holder
shall be entitled to complete the process of exercising this
Warrant for such number of Shares in accordance with the
procedures contained herein notwithstanding the fact that
completion of the exercise of this Warrant would take place after
the Expiration Date. If an exercise by Holder is subject to HSR
Requirements, the amount payable upon such exercise shall be paid
to the Company within five (5) business days of the Holder's
receiving written notice the expiration or notice of early
termination of, or compliance with, all HSR Requirements.
(b) The Company and the Holder shall use all
reasonable efforts to comply with the HSR Requirements; provided,
however, that neither the Company nor the Holder shall be under
any obligation to comply with any request or requirement imposed
by the Federal Trade Commission (the "FTC"), the Department of
Justice ("DofJ") or any other governmental authority in
connection with their compliance with the HSR Requirements if the
Company or the Holder reasonably determines that such compliance
is unduly burdensome. Without limiting the generality of the
foregoing, neither the Company nor the Holder shall be obligated
to comply with any request by, or requirement of, the FTC, the
DofJ or any other governmental authority, that such party
determines is unduly burdensome: (i) to disclose
<PAGE> 2.5
information the Company or the Holder, as the case may be,
desires to keep confidential; (ii) to dispose or any assets or
operations; or (iii) to comply with any restriction on the manner
in which they conduct their respective operations. In the event
that the Company fails to comply with any of the HSR Requirements
pursuant to the immediately preceding sentence, it shall be
obligated to pay to the Holder within sixty (60) business days
following written election from the Holder an amount equal to the
difference between: (1) the Market Price as of the date of the
Common Stock Warrant Notice of Exercise, multiplied by the number
of Shares to which such notice relates; and (2) the Per Share
Purchase Price, multiplied by the number of such Shares.
2. ADJUSTMENT OF NUMBER OF SHARES AND PER SHARE PURCHASE PRICE.
The number of Shares purchasable upon the exercise of this
Warrant, and the Per Share Purchase Price, will be subject to
adjustment from time to time as provided in this Section 2:
2.1 Subdivision or Combination of Common Stock. If the
Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the Per Share
Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be
proportionately increased. If the Company at any time combines
(by reverse stock split or otherwise) its outstanding shares of
Common Stock into a smaller number of shares, the Per Share
Purchase Price in effect immediately prior to such combination
shall be proportionately increased and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be
proportionately decreased.
2.2 Stock Dividends. If the Company at any time while this
Warrant remains outstanding and unexpired pays a dividend,
without receipt of consideration therefor, to the holders of
Common Stock payable in shares of Common Stock, Preferred Stock,
other capital stock or other securities convertible into or
exchangeable for Common Stock, Preferred Stock or other capital
stock ("Convertible Securities"), or options to purchase Common
Stock, Preferred Stock, other capital stock or Convertible
Securities ("Options"), other than any event for which adjustment
is made pursuant to Section 2.1 hereof, the Holder shall, upon
exercise of this Warrant be entitled to receive, in addition to
the number of Shares receivable thereupon, the amount of Common
Stock, Preferred Stock, other capital stock, Convertible
Securities or Options that such Holder would have received had it
been Holder of record of such Shares as of the date on which
holders of Common Stock received or became entitled to receive
such additional shares of Common Stock, Preferred Stock, other
capital stock, Convertible Securities or Options. Any adjustment
under this Section 2.2 will become effective on the record date
or, if there is no record date, on the date of issuance.
2.3 Reorganization, Reclassifications, Mergers or Sales.
Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction (including, without
limitation, any Corporate Event (as defined in the Investor
Rights Agreement)), in each case that is effected in such a way
that the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or
assets, or a combination thereof, with respect to or in exchange
for Common
<PAGE> 2.6
Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, other than any event for
which adjustment is made pursuant to Section 2.1 or 2.2 hereof,
the Company shall make appropriate provision (in form and
substance reasonably satisfactory to the Holder) to ensure that
the Holder shall thereafter have the right to acquire and
receive, upon exercise of this Warrant in accordance with its
terms and upon payment of the Per Share Exercise Price then in
effect, in lieu of each Share of Common Stock immediately
theretofore acquirable and receivable upon the exercise of this
Warrant, such shares of stock, securities or assets as would have
been issued or payable with respect to each share of Common Stock
immediately theretofore acquirable and receivable upon exercise
of the Warrant had the Warrant been exercised immediately prior
to such Organic Change. The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Company)
resulting from consolidation or merger or the entity purchasing
such assets assumes by written instrument, the obligation to
deliver to such Holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such Holder may
be entitled to acquire.
2.4 Certain Events. If (i) any event occurs of a type that
would have an effect on the rights granted under this Warrant
similar to the effect of any event described by the other
provisions of this Section 2 and (ii) such event is not expressly
provided for by such other provisions, then an appropriate
adjustment in the Per Share Purchase Price and the number of
shares of Common Stock obtainable upon exercise of this Warrant
so as to protect the rights of the Holder shall be made. Without
limiting the generality of the foregoing, such events would
include the granting of stock appreciation rights, phantom stock
rights or other rights with equity features.
2.5 Notices.
(a) Within ten (10) business days of any adjustment of
the Per Share Purchase Price, the Company shall give written
notice thereof to the Holder, setting forth and certifying in
reasonable detail the facts causing such adjustment and the
calculation of such adjustment. The Company will give due
consideration to, and consult with counsel regarding, any
objection the Holder may have to the matters described in such
notice, and will make any corrections to such notice deemed
necessary to conform with the terms of this Warrant.
(b) The Company shall give written notice to the
Holder at least ten (10) business days prior to the date on which
the Company closes its books or takes a record (A) with respect
to any dividend or distribution (cash or otherwise) upon the
Common Stock, (B) with respect to any pro rata subscription or
other offer to holders of Common Stock and (C) for determining
rights to vote with respect to any Organic Change, dissolution or
liquidation.
(c) The Company shall also give written notice to the
Holder at least ten (10) business days prior to the date on which
any Organic Change, dissolution or liquidation shall take place,
and, for so long as Intel or any of its Majority Owned
Subsidiaries holds the Warrant or any portion thereof, at least
three (3) business days prior to the date it enters into an
agreement to do any of the foregoing.
<PAGE> 2.7
3. TRANSFERABILITY OF WARRANT.
3.1 Majority Owned Subsidiary. A "Majority Owned
Subsidiary" shall mean a subsidiary of which Intel beneficially
owns, either directly or indirectly, at least 50% of the voting
power of all outstanding voting securities. This Warrant may not
be transferred or assigned in whole or in part, at any time, and
from time to time, except to any Majority-Owned Subsidiary.
Prior to such time as any Majority-Owned Subsidiary shall cease
to be such, Intel shall cause such Majority-Owned Subsidiary to
transfer this Warrant to Intel or any of Intel's Majority-Owned
Subsidiaries.
4. MISCELLANEOUS.
4.1 Legends. Any certificate for Shares issued upon
exercise hereof will be imprinted with a legend in substantially
the form set forth in the Common Stock Warrant Notice of Exercise
form attached hereto as Annex I.
4.2 Investor Rights Agreement. This Warrant and the Shares
are subject to the terms and conditions of that certain Investor
Rights Agreement between the Company and Intel dated as of March
18, 1997 (the "Investor Rights Agreement").
4.3 Successors and Assigns. The terms and provisions of
this Warrant will inure to the benefit of, and be binding upon,
the Company and the Holder and their respective successors and
assigns of the Holder and of the Company.
4.4 Governing Law. This Warrant will be governed by and
construed under the internal laws of the State of Delaware,
without reference to principles of conflict of laws or choice of
laws.
4.5 Headings. The headings and captions used in this
Warrant are used for convenience only and are not to be
considered in construing or interpreting this Warrant. All
references in this Warrant to sections and annexes will, unless
otherwise provided, refer to sections and hereof and annexes
attached hereto, all of which annexes are incorporated herein by
this reference.
4.6 Notices. Unless otherwise provided, any notice
required or permitted under this Warrant shall 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 under circumstances in which such service guarantees 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 4.6.
<PAGE> 2.8
[The remainder of this page is intentionally left blank.]
<PAGE> 2.9
STANDARD MICROSYSTEMS
CORPORATION
By: _______________________
Name: _____________________
Title: ____________________
Accepted:
INTEL CORPORATION
By: _______________________
Name: _____________________
Title: ____________________
[SIGNATURE PAGE COMMON STOCK WARRANT]
<PAGE> 2.10
ANNEX TO
WARRANT
______________, 199___
Standard Microsystems Corporation
80 Arkay Drive
Hauppauge, New York 11788
Common Stock Warrant Notice of Exercise
---------------------------------------
Gentlemen:
On this date the undersigned hereby acquires from Standard
Microsystems Corporation, a Delaware corporation (the "Company"),
an aggregate of ________ shares of the Company's Common Stock
(the "Warrant Shares"), by exercise, for such number of shares,
of that certain Warrant to Purchase Shares of Common Stock (the
"Warrant"), dated as of March 18, 1997 from the Company to the
original holder of the Warrant. However, if this exercise of the
Warrant is subject to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") filing requirements,
this Warrant shall be deemed to have been exercised on the date
immediately following the date of the expiration or early
termination of all HSR Act restrictions.
1. Investment Representations and Warranties. The undersigned
represents and warrants that:
1.1 Purchase for Own Account. The Warrant Shares to be
purchased by the undersigned will be acquired for investment for
the undersigned's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within
the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and the undersigned has no present intention of selling,
granting any participation in, or otherwise distributing the
same. The undersigned also represents that it has not been
formed for the specific purpose of acquiring the Warrant Shares.
1.2 Disclosure of Information. The undersigned has
received or has had full access to all the information it
considers necessary or appropriate to make an informed investment
decision with respect to the Warrant Shares to be purchased by
the undersigned.
1.3 Investment Experience. The undersigned understands
that the purchase of the Warrant Shares involves substantial
risk. The undersigned: (a) has experience as an investor in
securities of companies and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the
Warrant Shares and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits
and risks of this investment in the Warrant Shares and protecting
its own interests in connection with this investment and/or (b)
has a preexisting personal or business relationship with the
Company and certain of its officers, directors or controlling
persons of a nature and duration that enables the
<PAGE> 2.11
undersigned to be aware of the character, business acumen and
financial circumstances of such persons.
1.4 Accredited Investor Status. The Investor is an
"accredited investor" within the meaning of Regulation D
promulgated under the 1933 Act.
1.5 Restricted Securities. The undersigned understands
that the Warrant Shares to be purchased by the undersigned
hereunder, are characterized as "restricted securities" under the
1933 Act inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under the
1933 Act and applicable regulations thereunder such securities
may be resold without registration under the 1933 Act only in
certain limited circumstances. The undersigned is familiar with
Rule 144 of the SEC, as presently in effect, and understands the
resale limitations imposed thereby and by the 1933 Act. The
undersigned understands that the Company is under no obligation
to register any of the securities sold hereunder except as
provided in the Investor Rights Agreement between the Company and
Intel Corporation dated as of March, 1997 (the "Investor Rights
Agreement").
1.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the undersigned
further agrees not to make any disposition of all or any portion
of the Warrant Shares unless and until:
(a) there is then in effect a registration statement
under the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
(b) the undersigned has notified the Company of the
proposed disposition and has furnished the Company with a
statement of the circumstances surrounding the proposed
disposition, and the undersigned has furnished the Company, at
the expense of the undersigned or its transferee, with an opinion
of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities
under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this
Section 1.6, no such registration statement or opinion of counsel
will be required for any transfer of any Warrant Shares in
compliance with SEC Rule 144, Rule 144A or Rule 145(d), or if
such transfer otherwise is exempt, in the view of the Company's
legal counsel, from the registration requirements of the 1933
Act.
1.7 Investor Rights Agreement. The undersigned agrees
and acknowledges that the Warrant Shares are subject to the terms
and conditions or the Investor Rights Agreement.
2. Legends. The undersigned understands that certificates
evidencing the Warrant Shares will bear each of the legends set
forth below:
2.1 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR
<PAGE> 2.12
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
2.2 THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR RIGHTS
AGREEMENT BETWEEN THE COMPANY AND INTEL CORPORATION DATED AS OF
March 18, 1997, A COPY OF WHICH IS AVAILABLE FOR EXAMINATION AT
THE ISSUER'S PRINCIPAL OFFICE.
2.3 Any legends required by any applicable state securities
laws.
The undersigned agrees that, to ensure and enforce compliance
with the restrictions imposed by applicable law and those
referred to in the foregoing legend, or elsewhere herein, the
Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other
instrument representing Warrant Shares.
3. Net Exercise Election. If applicable, the undersigned
elects to purchase the Warrant Shares by Net Exercise (as defined
in the Warrant), by initialing in the following space (please
initial only if Net Exercise chosen): _________
4. Same Day Sale Election. If applicable, the undersigned
elects to purchase the Warrant Shares by "same day sale" pursuant
to the provisions of Section 1.3(b) of the Warrant, by initialing
on the following space (please initial only if Same Day Sale
chosen): _________
By: _______________________________
Name: _____________________________
Title: ____________________________
Address: __________________________
__________________________
__________________________
Date signed: ______________________
[SIGNATURE PAGE
COMMON STOCK WARRANT NOTICE OF EXERCISE]
EXHIBIT 3
INVESTOR RIGHTS AGREEMENT
<PAGE> 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
---------------
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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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;
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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;
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
2200 Mission College
Blvd.
Santa Clara, California
95052-8119
Attention: Treasurer,
M/S: SC4-210
Telephone No.: (408) 765-1240
Facsimile No.: (408) 765-8458
and
Attention: General
Counsel, M/S SC4-203
Telephone No.: (408) 765-1125
Facsimile No.: (408) 765-7636
with a copy to: Gibson, Dunn & Crutcher
LLP
One Montgomery Street
Telesis Tower
San Francisco, California
94104-4505
Attention: Kenneth R.
Lamb
Telephone No.: (415) 393-8382
Facsimile No.: (415) 986-5309
(b) if to the Company, at: Standard Microsystems
Corporation
80 Arkay Drive
Hauppauge, New York 11788
Attention: Chairman and
CEO
Telephone No.: (516) 434-2803
Facsimile No.: (516) 273-5550
with a copy to: Loeb & Loeb L.L.P.
345 Park Avenue
New York, New York 10154-
0037
Attention: David C.
Fischer, Esq.
Telephone No.: (212) 407-4827
Facsimile No.: (212) 407-4990
<PAGE> 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.
<PAGE> 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.]
<PAGE> 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]
EXHIBIT 4
<PAGE> 4.1
PRESS RELEASE OF
STANDARD MICROSYSTEMS CORPORATION
STANDARD MICROSYSTEMS ANNOUNCES INTEL EQUITY INVESTMENT AS
THE TWO COMPANIES AGREE TO COOPERATE IN THE DEVELOPMENT OF
NEXT-GENERATION INPUT/OUTPUT COMPONENTS FOR THE PERSONAL
COMPUTER INDUSTRY
HAUPPAUGE, N.Y. (March 18, 1997)--Standard Microsystems
Corporation (NASDAQ:SMSC) announced today that Intel
Corporation of Santa Clara, California (NASDAQ:INTC) has
entered into agreements with Standard Microsystems, a
supplier of leading-edge input/output semiconductor
integrated circuits. Intel will also make an equity
investment in Standard Microsystems. Under the terms of
agreements recently signed by the companies, Intel and
Standard Microsystems will work cooperatively on the
integration of new semiconductor input/output (I/O)
integrated circuits, which have been specifically designed
to work with Intel's latest microprocessors and core logic
chip sets, into selected Intel personal computer motherboard
designs through the end of 1997. The two companies have
also agreed to cooperate on a family of proprietary low-pin-
count I/O devices for future applications.
Standard Microsystems expects to supply these I/O integrated
circuit components to customers around the world, including
Intel's own personal computer motherboard division, Intel's
motherboard licensees and major personal computer
manufacturers. As a result, Standard Microsystems
anticipates that the total amount of business that it will
do with Intel and Intel's licensees should increase.
Under the agreements, Intel will purchase just under a 10%
interest in Standard Microsystems Corporation, buying
approximately 1,540,000 shares of Standard Microsystems'
common stock directly from the Company at a price of $9.50
per share. Intel will also receive warrants to purchase an
additional 10% interest in Standard Microsystems and certain
anti-dilutive rights.
Speaking for Standard Microsystems Corporation, Mr. Paul
Richman, the Company's Chairman of the Board and Chief
Executive Officer, indicated that "Over the past few years,
despite intense competition, Standard Microsystems has
become one of the leading architects and suppliers of
input/output circuits to the worldwide personal computer
industry. We have always had a very good relationship with
Intel, a company that I personally have an enormous amount
of respect for, and this new cooperative effort with them
should help us considerably in our efforts to establish
Standard Microsystems' advanced input/output devices as
worldwide industry standards. We look forward to working
more closely with Intel in this and other areas over the
years ahead."
Standard Microsystems Corporation (NASDAQ:SMSC) is based in
Hauppauge, New York and has offices worldwide, including
locations in North America, Australia, Asia, Europe, Japan
and Latin America. Standard Microsystems' Component
Products Division supplies metal-oxide-semiconductor/very-
large-scale-integrated (MOS/VLSI) circuit components for
personal computers, local area networks (LANs)and embedded
control systems. The Company's System Products Division
provides a broad range of networking solutions for scaling,
managing and connecting local area networks, including LAN
adapters, LAN hubs, LAN switches and network management
software. Additional information concerning Standard
Microsystems Corporation is available from its site on the
World Wide Web at http://www.smc.com
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Except for historical
information contained herein, the matters discussed in this
announcement are forward-looking statements that involve
risks and uncertainties, including the timely development
and market acceptance of new products, the impact of
competitive products and pricing, the effect of changing
economic conditions, and such risks and uncertainties as are
detailed from time to time in the company's SEC reports,
including the Annual Report filed on Form 10-K and the
Quarterly Reports filed on Form 10-Q.
E0021E.DOC/3-25-97
EXHIBIT 5
<PAGE> 5.1
SIGNATURE AUTHORITY
[INTEL CORPORATE ADDRESS]
[INTEL LOGO]
March 7, 1997
TO WHOM IT MAY CONCERN:
I will be out of the office on sabbatical from Monday, March
10 through Tuesday, May 6, 1997. In my absence, Peter N.
Detkin, Director of Litigation, will have full signature
authority.
Sincerely,
/s/F. Thomas Dunlap, Jr.
- --------------------------
F. Thomas Dunlap, Jr.
Vice President, General Counsel & Secretary
