SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13d-2(1)
(Amendment No.)*
3Dlabs Inc., Ltd.
---------------------------------------------
(Name of Issuer)
Common Stock
---------------------------------------------
(Title of Class of Securities)
G8846VV-10-3
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(CUSIP Number)
F. Thomas Dunlap
Vice President, General Counsel and Secretary
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)
April 17, 2000
---------------------------------------------
(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 (e), 13d-1 (f) or 13d-1 (g), check the following box [ ].
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter the disclosures provided
in a prior cover page.
The information required in 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 (the "Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 12 Pages
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 2 of 12 Pages
1. NAME OF REPORTING PERSON: INTEL CORPORATION
S.S. or I.R.S. IDENTIFICATION NO. OF 94-1672743
ABOVE PERSON:
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP** (a) [ ]
(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
7. SOLE VOTING POWER: 1,596,774(1)
NUMBER OF
SHARES 8. SHARED VOTING POWER: N/A
BENEFICIALLY
OWNED BY EACH 9. SOLE DISPOSITIVE POWER: 1,596,774(1)
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER: N/A
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 1,596,774(1)
REPORTING PERSON:
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES** [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 8.6%
(11):
14. TYPE OF REPORTING PERSON: CO
**SEE INSTRUCTIONS BEFORE FILLING OUT!
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(1)Shares reported are shares to be beneficially owned as of June
17, 2000 and are subject to increase as described in Item 5.
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 3 of 12 Pages
ITEM 1. Security and Issuer.
(a) Name of Principal Executive Offices of Issuer:
3D Labs Inc., Ltd. (the "Issuer")
480 Potrero Ave.
Sunnyvale CA 94086
(b) Title of Class of Equity Securities:
Common Stock, par value $0.01
ITEM 2. Identity and Background.
(a) Name of Person Filing:
Intel Corporation (the "Reporting Person")
(b) Address of Principal Business Office:
2200 Mission College Boulevard
Santa Clara, CA 95052-8119
(c) Principal Business:
Manufacturer of microcomputer components,
modules and systems.
(d) Criminal Proceedings:
During the last five years, neither the
Reporting Person nor any executive officer or
director of the Reporting Person has been
convicted in any criminal proceeding.
(e) Civil Proceedings:
During the last five years, neither the
Reporting Person nor any executive 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 was or is
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>
CUSIP No. G8846VV-10-3 Schedule 13D Page 4 of 12 Pages
(f) Place of Organization:
Delaware
Attached hereto as Appendix A is information required
by this Item 2 with respect to the executive officers
and directors of the Reporting Person. All such
individuals are U.S. citizens, except as otherwise
indicated on Appendix A.
ITEM 3. Source and Amount of Funds or Other Consideration.
(a) Source of Funds: Funds for the purchase were
derived from the Reporting Person's working
capital.
(b) Amount of Funds: Loan of $7,500,000 to Issuer.
The principal loan amount and all accrued
interest may be converted into Common Stock of
the Issuer as described more fully in Item 4.
ITEM 4. Purpose of the Transaction.
On December 17, 1999 (the "Effective Date")
Middlefield Ventures ("Middlefield"), a wholly owned
subsidiary of Intel Corporation (the "Reporting
Person"), and the Issuer entered into a Convertible
Subordinated Note Agreement (the "Note") and a
Registration Rights Agreement. The term of the Note,
pursuant to which Middlefield loaned the Issuer
$7,500,000, began on December 17, 1999 and will mature
on December 17, 2004 ("Repayment Date"). Interest on
the unpaid balance accrues at the rate of 4.5% per
annum, calculated on a compound basis for a 360 day
year and actual days elapsed, from the Effective Date
until the Repayment Date. Middlefield may convert at
its option all or a portion of the unpaid balance on
the Note (including accrued interest through the
conversion date) into Common Stock of the Issuer at
any time beginning six months after the Effective Date
at a conversion price of $5.563. On June 17, 2000 the
Note will be convertible into 1,378,611 shares of
Common Stock of the Issuer if Middlefield elects to
convert the Note on that date.
Additionally, the Reporting Person owns the following
Common Stock: (i) 212,992 shares of Common Stock
acquired at the time of the Issuer's initial public
offering as a result of an automatic conversion of a
Preferred Stock, and (ii) 5,171 shares of Common Stock
acquired in connection with a Warrant exercise on
November 23, 1998.(2) The Preferred Shares and Warrant
were acquired on October 16, 1996 as an investment.
Contemporaneously the Reporting Person and the Issuer
have entered into a long-term cooperation and license
agreement (the "Agreement") dated
- --------------
(2) All shares amounts reported are on an as converted post
initial public offering basis.
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 5 of 12 Pages
October 16, 1996. Pursuant to the Agreement the
Reporting Person will receive a contingent license to
manufacture a certain product developed and
manufactured by the Issuer.
The Reporting Person currently holds Common Stock and
a note convertible into Common Stock. The Reporting
Person will from time to time explore opportunities
for liquidating all or a portion of the Common Stock,
through one or more sales pursuant to public or
private offerings or otherwise depending upon the
Reporting Person's evaluation of market conditions,
market price, alternative investments opportunities,
liquidity needs and other factors. The Reporting
Person may determine to retain some portion of the
Common Stock as an investment.
In addition, the Reporting Person and the Issuer
entered into a long-term cooperation and license
agreement (the "Agreement") dated October 16, 1996.
Pursuant to the Agreement the Reporting Person will
receive a contingent license to manufacture a certain
product developed and manufactured by the Issuer.
ITEM 5. Interest in Securities of the Issuer.
(a) Number of Shares Beneficially Owned: 218,163
shares of Common Stock (See footnote 1 on Cover
Page).
Right to Acquire: 1,384,611
Percent of Class: 8.6% based upon 18,521,064
shares of Common Stock outstanding as of March
31,2000 as stated by the Issuer on April 18,
2000.
(b) Sole Power to Vote, Direct the Vote of, or
Dispose of Shares: 1,596,774 (See footnote 1
on Cover Page)
(c) Recent Transactions: As stated in Item 4, the
number of shares beneficially owned by the
Reporting Person will increase as additional
interest accrues on the unpaid balance of the
Note.
(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 Note at any date (the "First Issuer
Acceleration date") occurring 18 months after the
Effective Date but before 30 months after the
Effective Date, the Issuer will have the option to
require Middlefield to convert all or a portion of the
Repayment Amount if the weighted average closing price
of the Common Stock
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 6 of 12 Pages
for the twenty consecutive trading days prior to the
First Issuer Acceleration Date is at least 50% greater
than the Conversion Price. Further, at any date (the
"Second Issuer Acceleration Date") occurring 30 months
after the Effective Date the Issuer will have the
option to require Middlefield to convert all or a
portion of the Repayment Amount if on the Second
Issuer Acceleration Date the weighted average closing
price of the Common Stock for the twenty consecutive
trading days prior to the Second Issuer Acceleration
Date is equal to or greater than the Conversion Price.
Further, the Reporting Person has certain registration
rights pursuant to a Registration Rights Agreement
attached as an exhibit hereto. Those registration
rights shall apply to any Common Stock issued with
respect to the Note including any stock split, stock
dividend, recapitalization, or similar event.
ITEM 7. Material to be Filed as Exhibits.
Exhibit 1 Convertible Subordinated Note Agreement
dated December 17, 1999.
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 7 of 12 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 April 26, 2000.
INTEL CORPORATION
By: /s/F. Thomas Dunlap, Jr.
------------------------
F. Thomas Dunlap, Jr.
Vice President, General
Counsel and Secretary
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 8 of 12 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 except as indicated below.
Name: Craig R. Barrett
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal President and Chief Executive Officer
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 in
which employment
is conducted:
Name: John Browne
Business BP Amoco p.l.c., Britannic House, 1 Finsbury
Address: Circus, London EC2M 7BA
Principal Group Chief Executive
Occupation:
Name, principal The BP Amoco p.l.c., an integrated oil
business and company.
address of Britannic House, 1 Finsbury Circus
corporation or London EC2M 7BA
other
organization in
which employment
is conducted:
Citizenship: British
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 9 of 12 Pages
Name: Winston H. Chen
Business Paramitas Foundation, 3945 Freedom Circle,
Address: Suite 760, Santa Clara, CA 95054
Principal Chairman
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 in
which employment
is conducted:
Name: Andrew S. Grove
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Chairman of the Board of Directors
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 in
which employment
is conducted:
Name: D. James Guzy
Business 1340 Arbor Road, Menlo Park, CA 94025
Address:
Principal Chairman
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 in
which employment
is conducted:
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 10 of 12 Pages
Name: Gordon E. Moore
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Chairman Emeritus of the Board of Directors
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 in
which employment
is conducted:
Name: David S. Pottruck
Business 101 Montgomery Street, San Francisco, CA 94104
Address:
Principal President and Co-Chief Executive Officer
Occupation:
Name, principal The Charles Schwab Corporation, an investment
business and company
address of 101 Montgomery Street
corporation or San Francisco, CA 94104
other
organization in
which employment
is conducted:
Name: Jane E. Shaw
Business 1310 Orleans Drive, Sunnyvale, CA 94089
Address:
Principal Chairman and Chief Executive Officer
Occupation:
Name, principal AeroGen, Inc., a private company specializing
business and in controlled delivery of drugs to the lungs
address of 1310 Orleans Drive
corporation or Sunnyvale, CA 94089
other
organization in
which employment
is conducted:
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 11 of 12 Pages
Name: Leslie L. Vadasz
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Senior Vice President, Director, Corporate
Occupation: Business Development
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 in
which employment
is conducted:
Name: David B. Yoffie
Business Harvard Business School, Morgan Hall 215,
Address: Soldiers Field Road, Boston, MA 02163
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 Morgan Hall 215,Soldiers Field Road
other Boston, MA 02163
organization in
which employment
is conducted:
Name: Charles E. Young
Business 10920 Wilshire Boulevard, Suite 1835, Los
Address: Angeles, CA 90024
Principal A. Chancellor Emeritus
Occupation:
B. Interim President
Name, principal A. University of California at Los Angeles, an
business and educational institution.
address of 10920 Wilshire Boulevard, Suite 1835
corporation or Los Angeles, CA 90024
other
organization in B. University of Florida
which employment 226 Tigert Hall
is conducted: PO Box 113150
Gainesville, FL 32610
<PAGE>
CUSIP No. G8846VV-10-3 Schedule 13D Page 12 of 12 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, California 95052-
8119, which address is Intel Corporation's business address.
Name: Paul S. Otellini
Title: Executive Vice President, General Manager, Intel
Architecture Business Group
Name: Gerhard H. Parker
Title: Executive Vice President, General Manager, New
Business Group
Name: Andy D. Bryant
Title: Senior Vice President, Chief Financial Officer and
Enterprise Services Officer
Name: Sean M. Maloney
Title: Senior Vice President, Director, Sales and Marketing
Group
Name: Michael R. Splinter
Title: Senior Vice President, General Manager, Technology
and Manufacturing Group
Name: Albert Y. C. Yu
Title: Senior Vice President, General Manager,
Microprocessor Products Group
Name: F. Thomas Dunlap, Jr.
Title: Vice President, General Counsel and Secretary
Name: Arvind Sodhani
Title: Vice President, Treasurer
<PAGE>
EXHIBIT 1
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
This Convertible Subordinated Note Agreement (this
"Agreement") is entered into this 17th day of December 1999 (the
"Effective Date") by and between 3Dlabs Inc., Ltd., a Bermuda
company (the "Company"), and Middlefield Ventures, Inc., a
Delaware corporation ("Middlefield").
WHEREAS, Middlefield is willing, pursuant to the terms and
conditions of this Agreement, to purchase from the Company a
convertible subordinated note (the "Note") in the principal
amount of seven million five hundred thousand dollars
($7,500,000) (the "Principal Amount"), which Note shall be
convertible into the Common Stock of the Company (the "Common
Stock") on the terms and subject to the conditions set forth
herein; and
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Intel" shall mean Intel Corporation, a Delaware
corporation and the parent corporation of Middlefield.
"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 applicable party and its subsidiaries, taken
as a whole.
2. NOTE. The Company will issue the Note to Middlefield
in the Principal Amount on the Effective Date subject to the
terms and conditions set forth in this Agreement. The Note will
be evidenced by a Convertible Subordinated Promissory Note in
substantially the form attached hereto as Exhibit A.
3. TERM OF NOTE; INTEREST; REPAYMENT. The term of the
Note will begin on the Effective Date and end on December 17,
2004 (the "Repayment Date"). Interest on the unpaid principal
balance (such unpaid principal balance is referred to as the
"Outstanding Balance") will accrue from the Effective Date at the
rate of four and a half percent (4.5%) per annum, calculated on a
compound basis for a 360 day year and actual days elapsed;
provided, however, that no such accrued interest shall be due and
payable prior to the earlier of the Repayment Date or upon a
conversion event described in Section 6. If the Note has not
been earlier converted, the Company will repay the Outstanding
Balance plus all interest accrued thereon (the sum referred to as
the "Repayment Amount") on the Repayment Date.
4. SUBORDINATION. The indebtedness evidenced by the Note
is hereby expressly subordinated, in right of payment to any
indebtedness at any time owing by the Company to any (i) bank,
financial or lending institution or other non-affiliated entity
primarily in the business of extending credit or other financial
accommodations; (ii) entity that guarantees
<PAGE> 2
MIDDLEFIELD/3Dlabs CONFIDENTIAL
any obligation of the Company; and (iii) holder of the Company's
trade debt (collectively, "Senior Indebtedness"). So long as any
default by the Company has occurred under any instrument or
agreement evidencing any Senior Indebtedness, no payment shall be
made in respect of the Note until the Senior Indebtedness has
been repaid in full in cash or other provisions satisfactory to
the holde4rs of the Senior Indebtedness have been made. Until
such time, Middlefield shall not ask, demand or sue for any
amounts owning hereunder, accept any payment or transfer of
property in settlement ther3eof, or take any action inconsistent
with the rights of the holders of the Senior Indebtedness.
Middlefield shall not initiate any insolvency proceeding against
the Company. Notwithstanding the foregoing, nothing in this
Section 4 shall affect Middlefield' right to convert the Note
pursuant to Section 6.
5. PREPAYMENT TERMS. The Repayment Amount may not be
prepaid by the Company for a period of thirty months after the
Effective Date. Beginning thirty months after the Effective
Date, the Company may prepay the Repayment amount to Middlefield.
In addition, prior to initiating any prepayment, the Company will
provide Middlefield at least thirty days prior written notice of
the Company's intention and allow Middlefield to decide whether
it wishes to convert the Repayment Amount pursuant to Section 6.1
prior to any prepayment.
6. CONVERSION; ACCELERATION. The Repayment Amount may be
convertible or accelerated on the following basis:
6.1 Optional Conversion by Middlefield. At any time
beginning six months after the Effective Date, Middlefield may
convert all or a portion of the Repayment Amount into Common
Stock of the Company at a conversion price equal to a 17.5%
premium over the weighted average closing price of the Common
Stock for the fifteen consecutive trading days prior to the
Effective Date which shall be $5.563 (the "Conversion Price").
The shares of Common Stock issued upon such conversion will be
referred to as the "Shares." The Conversion Price would be
subject to adjustment to reflect any stock splits, stock
dividends, recapitalizations, or similar transactions by the
Company. In case of any partial conversion, the Repayment Amount
will be reduced by the dollar amount paid by Middlefield for any
Shares pursuant to such conversion. In addition, upon a partial
conversion, the Company and Middlefield shall cancel the existing
Note and shall execute and deliver a new Note reflecting the
remaining Repayment Amount.
6.2 Optional Acceleration Upon Extraordinary Event.
In the event of: (A) the acquisition of the Company by another
entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization,
merger or consolidation) that results in the transfer of fifty
percent (50%) or more of the outstanding voting power of the
Company; or (B) a sale of all or substantially all of the assets
of the Company, Middlefield may at any time thereafter, at its
option and in its sole discretion, by written notice to the
Company convert the Repayment Amount pursuant to Section 6.1
above, or transfer the Note and this Agreement pursuant to
Section 13.3 below. Notwithstanding the foregoing, if the
consideration per share of the Company's Common Stock in a
transaction described in (A) above is equal to or
<PAGE> 3
MIDDLEFIELD/3Dlabs CONFIDENTIAL
greater than the Conversion Price, the Repayment amount shall be
automatically converted pursuant to Section 6.1 above.
6.3 Optional Acceleration by Company. At any date
(the "First Company Acceleration Date") occurring 18 months after
the Effective Date but before 30 months after the Effective Date,
the Company will have the option to require Middlefield to
convert all or a portion of the Repayment Amount pursuant to
Section 6.1 above so long as on the First Company Acceleration
Date the weighted average closing price of the Common Stock for
the twenty consecutive trading days prior to the First Company
Acceleration Date is at least 50% greater than the Conversion
Price. There may be more than one First Company Acceleration
Date under the terms of this paragraph so long as there is still
an outstanding Repayment Amount during the time period associated
with a First Company Acceleration Date.
At any date (the "Second Company Acceleration Date")
occurring 30 months after the Effective Date, while any Repayment
amount is still outstanding, the Company will have the option to
require Middlefield to convert all or a portion of the Repayment
Amount pursuant to Section 6.1 above so long as on the Second
Company Acceleration Date the weighted average closing price of
the Common Stock for the twenty consecutive trading days prior to
the Second Company Acceleration Date is equal to or greater than
the conversion price. There may be more than one Second Company
Acceleration Date under the terms of this paragraph so long as
there is still an outstanding Repayment Amount during the time
period associated with a Second Company Acceleration Date.
Upon the occurrence of a Company acceleration date
under this Section 6.3, the Company will provide Middlefield with
a written notice of the Company's intent to effect an
acceleration under this section and such acceleration and related
conversion would occur five business days following such
acceleration date.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Middlefield that,
except as set forth in any disclosure schedules attached to this
Agreement, the statements in the following paragraphs of this
Section 7 are all true and correct in all material respects:
7.1 Organization Good Standing and Qualification. The
Company is a company duly organized, validly existing and in good
standing under the laws of Bermuda and has all corporate power
and authority required to (a) carry on its business as presently
conducted, and (b) enter into this Agreement and the other
agreements, instruments and documents contemplated hereby, and to
consummate the transactions contemplated hereby. 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.
7.2 Subsidiaries. Except as set forth on Schedule
7.2, the Company does not have any subsidiaries, nor does the
Company own any capital stock, assets comprising the business of,
obligations of, or any other interest (including any equity or
partnership interest) in, or any outstanding loan or advance to
or from, any person or entity.
<PAGE> 4
MIDDLEFIELD/3Dlabs CONFIDENTIAL
7.3 Due Authorization. All corporate actions on the
part of the Company, its officers, directors and shareholders
necessary for: (a) the authorization, execution, delivery of,
and the performance of all obligations of the Company under this
Agreement, (b) the authorization, executing and delivery of the
Note, and (c) the authorization, issuance, reservation for
issuance and delivery of the Shares have been or will be taken,
and this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with their terms, except (a) 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 and (b) as
rights to indemnity or contribution may be limited under federal
or state securities laws or by principles of public policy
thereunder.
7.4 Compliance with Securities Laws. Assuming the
correctness of the representations made by Middlefield in Section
8 hereof, the transactions contemplated by this Agreement will be
in compliance with applicable exemptions from (i) the
registrations and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act") and
(ii) the registration and qualification requirements of all
applicable securities laws of the states of the United States.
7.5 Governmental Consents. Except of the permission of
the Bermuda Monetary Authority, no consent, approval, order or
authorization of or registration, qualification, designation,
declaration or filing with, or notice to, any federal, state or
local governmental authority on the part of the Company is
required in connection with the execution of this Agreement or
the Note, or the consummation of the other transactions
contemplated by this Agreement.
7.6 Non-Contravention. The execution, delivery and
performance of this Agreement and the Note by the Company, and
the consummation by the Company of the transactions contemplated
hereby and the future issuance of the States in accordance with
this Agreement, 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 which would result in a Material Adverse Effect or
invalidate the transactions contemplated by this Agreement; or
(iii) constitute a material 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
material lien, claim or encumbrance on any assets of the Company
under, any material 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.
7.7 Litigation. There is no action, suit proceeding ,
claim arbitration or investigation ("Action") pending or, to the
best of the company's knowledge, threatened: (a) against the
Company, its activities, properties or assets, or any officer,
director or employee of the Company in connection with such
officer's, director's or employee's
<PAGE> 5
MIDDLEFIELD/3Dlabs CONFIDENTIAL
relationship with, or actions taken on behalf of, the Company
which if adversely adjudicated against the Company would result
in a Material Adverse Effect, or (b) that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this
Agreement (including the possible issuance of the Shares). 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 that would invalidate the
transactions contemplated under this Agreement.
7.8 SEC Documents.
(1) Reports. The Company has furnished to
Middlefield prior to the date hereof a complete and correct list
of all registration statements, reports and proxy statements
filed by the Company with the SEC on or after December 31, 1998
(the Company's Annual Report on Form 20-F for the fiscal year
ended December 31, 1998, its Quarterly Reports on Form 6-K for
the fiscal quarters ended March 31, June 30 and September 30,
1999 and all such other 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 (or if amended or superseded by a filing prior to the
Effective Date, then on the date of such filing), did not, as of
the date thereof, contain any untrue statement of a material fact
or omit to state material fact necessary in order to make the
statements made there in, 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 that was
required to have been filed as an exhibit to the SEC Document
that was not so filed.
(2) Financial Statements. The Company has
provided Middlefield with copies of its audited financial
statements (the "Audited Financial Statements") for the fiscal
year ended December 31, 1998, and its unaudited financial
statements for the nine-month period ended September 30, 1999
(the "Balance Sheet Date"). Since the Balance Sheet Date, the
Company has duly filed with the SEC all registration statements,
reports and proxy statements required to be filed by it under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the Securities Act. The Audited Financial Statements of the
Company and the unaudited consolidated financial statements of
the Company fairly present, in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis
(except as otherwise may be stated in the notes thereto), the
consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended subject to normal recurring accruals, which in
the opinion of management are not deemed material and normal year-
end audit adjustments in the case of unaudited interim financial
statements.
7.9 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:
(i) 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
<PAGE> 6
MIDDLEFIELD/3Dlabs CONFIDENTIAL
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;
(ii) any damage, destruction or loss, whether or
not covered by insurance except for such occurrences,
individually and collectively, that would not have a Material
Adverse Effect;
(iii)any waiver by the Company of a valuable right
or of a material debt owed to it, except of such waivers,
individually and collectively, that would not have a Material
Adverse Effect;
(iv) any material change or amendment to, or any
waiver of any material right 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;
(v) 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; or
(vi) any other event or condition of any
character, except for such events and conditions that have not
resulted, and could not reasonably be expected to result, either
individually or collectively, in a Material Adverse Effect.
7.10 Registration Rights. Except as set forth in
Schedule 7.10, the Company is not currently subject to any
agreement providing any person or entity any rights (including
piggyback registration rights) to have any securities of the
Company registered with the SEC or registered or qualified with
any other governmental authority. In addition, none of the
agreements set forth in Schedule 7.10 contain rights that are any
less favorable to the rights granted to Middlefield in the
Registration Rights Agreement attached hereto as Exhibit C.
7.11 Title to Property and Assets. Except as set forth
in Schedule 7.11, the non-leased 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 in any material respect affect the 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.
7.12 Tax Matters. The Company has filed all material
tax returns required to be filed, which returns are true and
correct in all material respects, and the Company has paid in
full all taxes that have become due on or prior to the date
hereof, including penalties and interest, assessments, fees and
other charges, other than those being contested in good faith
and/or those for which adequate reserves have been provided for.
<PAGE> 7
MIDDLEFIELD/3Dlabs CONFIDENTIAL
7.13 Full Disclosure. The information contained in this
Agreement and the SEC Documents with respect to the business,
operations, assets, results of operations and financial condition
of the Company, and the transactions contemplated by this
Agreement, are true and complete in all material respects and do
not omit to state any material fact or facts necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
8. REPRESENTATIONS AND WARRANTIES OF MIDDLEFIELD. Middlefield
represents and warrants to the Company as follows:
8.1 Organization Good Standing and Qualification. Middlefield 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
and the other agreements, instruments and documents contemplated
hereby, and to consummate the transactions contemplated hereby.
Middlefield 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.
8.2 Due Authorization. The execution of this Agreement
has been duly authorized by all necessary corporate action on the
part of Middlefield. This Agreement constitutes Middlefield's
legal, valid and binding obligation, enforceable in accordance
with its terms, except as may be limited by (a)(i) applicable
bankruptcy, insolvency, reorganization or other 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. Middlefield has
full corporate power and authority to enter into this Agreement,
except as rights to indemnity or contribution may be limited
under federal or state securities laws or by principles of public
policy thereunder.
8.3 Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation,
declaration or filing with, or notice to, any federal, state or
local governmental authority on the part of Middlefield is
required in connection with the execution of this Agreement or
the Note, or the consummation of the other transactions
contemplated by this Agreement.
8.4 Non-Contravention. The execution, delivery and
performance of this Agreement by Middlefield, and the
consummation by Middlefield of the transactions contemplated
hereby, do not and will not (I) contravene or conflict with the
Certificate of Incorporation or Bylaws of Middlefield; (ii)
constitute a violation of any provision of any federal, state,
local or foreign law binding upon or applicable to Middlefield;
or (iii) constitute a default or require any consent under, give
rise to any right or termination, cancellation or acceleration
of, or to a loss of any benefit to which Middlefield is entitled
under, or result in the creation or imposition of any lien, claim
or encumbrance on any assets of Middlefield
<PAGE> 8
MIDDLEFIELD/3Dlabs CONFIDENTIAL
under, any contract to which Middlefield is a party or any
permit, license or similar right relating to Middlefield or by
which Middlefield may be bound or affected.
8.5 Litigation. There is no Action pending against
Middlefield that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement. Middlefield 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 that would invalidate the transactions
contemplated under this Agreement.
8.6 Purchase for Own Account. The Note, when executed,
and the Shares, if and when issued, will be acquired for
investment for Middlefield's own account, not as a nominee or
agent, and not with a view to the public resale of distribution
thereof within the meaning of the Securities Act, and Middlefield
has no present intention of selling, granting any participation
in, or otherwise distributing the same. Middlefield also
represents that it has not been formed for the specific purpose
of issuing the Loan or acquiring the Shares.
8.7 Investment Experience. Middlefield understands
that the issuance of the Note and the potential conversion
thereof involves substantial risk. Middlefield 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 the
Note and the potential conversion thereof, and has such knowledge
and experience in financial or business matters that it is
capable of evaluating the merits and risks associated with the
Note and the potential conversion thereof, and protecting its own
interests in connection with the transactions contemplated
hereby.
8.8 Accredited Investor Status. Middlefield is an
"accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
8.9 Restricted Securities. Middlefield understands
that the Shares, if and when issued, will be characterized as
"restricted securities" under the Securities Act, inasmuch as
they are being acquired from the Company in a transaction not
involving a public offering and that under the Securities Act and
applicable regulations thereunder such securities may not be
resold without registration under the Securities Act or without
an exemption from such registration requirements. Middlefield is
familiar with Rule 144 of the SEC, as presently in effect, and
understands the resale limitations imposed thereby and by the
Securities Act.
8.10 Legends. Middlefield agrees that the certificates
for the Shares, if and when issued, shall bear the following
legend:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933, as amended, or with
any state securities commission, and may not
be transferred or disposed of by the holder
in the absence of a registration statement
which is effective under the Securities Act
of 1933, as amended, and applicable state
laws and rules, or unless, immediately prior
to the time set for transfer, such transfer
may be effected without violation of the
Securities Act of 1933, as
<PAGE> 9
MIDDLEFIELD/3Dlabs CONFIDENTIAL
amended, and other applicable state laws and
rules."
In addition, Middlefield agrees that the Company may place stop
transfer agents with respect to such certificates. The
appropriate portion of the legend and the stop transfer orders
will be removed promptly upon delivery to the Company of such
satisfactory evidence as reasonably may be required by the
Company that such legend or stop orders are not required to
ensure compliance with the Securities Act.
9. CONDITIONS TO MIDDLEFIELD'S OBLIGATIONS AT CLOSING. The
obligations of Middlefield under Section 2 of this Agreement are
subject to the fulfillment or waiver, on or before the Effective
Date, of each of the following conditions:
9.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in
Section 7 shall be true and correct in all material respects on
and as of the Effective Date.
9.2 Performance. The Company shall have performed and
complied in all material respects 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
Effective Date and shall have obtained all approvals, consents
and qualifications necessary to complete the purchase and sale
described herein, including the written approval of the Bermuda
Monetary Authority.
9.3 Proceedings and Documents. All Corporate and other
proceedings in connection with the transactions contemplated at
the closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to Middlefield, and
Middlefield shall 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:
(i) Certified Charter Documents. A copy of (i)
the Company's Memorandum of Association and (ii) the Bylaws of
the Company (as amended through the date of the Closing) both
certified by the Secretary of the Company as true and correct
copies thereof as of the Closing.
(ii) 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 reservation and potential future issuance of
the Shares, and the other matters contemplated hereby and
thereby.
9.4 License Agreement. Intel and the Company will have
executed that patent license agreement (the "License Agreement")
between the parties dated as of the Effective Date.
<PAGE> 10
MIDDLEFIELD/3Dlabs CONFIDENTIAL
9.5 Opinion of Company Counsel. Middlefield will have
received an opinion on behalf of the Company, dated as of the
date of the Closing, from counsel to the Company, in the form
attached as Exhibit B.
9.6 Other Actions. The Company shall have executed
such certificates, agreements, instruments and other documents,
and taken such other actions as shall be customary or reasonably
requested by Middlefield in connection with the transactions
contemplated hereby.
10. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to Middlefield under this Agreement
are subject to the fulfillment or waiver, on or before the
Effective Date, of each of the following conditions:
10.1 Representations and Warranties True. The
representation and warranties of Middlefield contained in Section
8 shall be true and correct in all material respects on and as of
the Effective Date.
10.2 Performance. Middlefield shall have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Effective Date and shall
have obtained all approvals, consents and qualifications
necessary effect the transactions described herein.
10.3 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. Such documents shall
include but not be limited to the following:
(i) 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, (ii) a good standing certificate from the Secretary of
State of Delaware; and (iii) the Bylaws of Middlefield (as
amended through the date of the Closing) certified by the
Secretary of Middlefield as a true and correct copy thereof as of
the Closing.
10.4 License Agreement. Intel and the Company will have
executed the License Agreement.
10.5 Other Actions. Middlefield shall have executed
such certificates, agreements, instruments and other documents,
and taken such other actions as shall be customary or reasonably
requested by the Company in connection with the transaction
contemplated hereby.
11. COVENANTS OF THE COMPANY. The Company covenants to
Middlefield as follows:
<PAGE> 11
MIDDLEFIELD/3Dlabs CONFIDENTIAL
11.1 Information Rights. The Company covenants and
agrees that, commencing on the Effective Date and continuing for
so long as the Note is outstanding or Middlefield or its
affiliates hold Shares with an aggregate value of at least
$3.5million, the Company shall:
(A) Annual Reports. Furnish to Middlefield
or its designee promptly following the filing of such report with
the SEC a copy of the Company's Annual Report on Form 20-F 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 of
Form 20-F, the Company shall, within one hundred and eighty (180)
days following the end of each respective fiscal year, deliver to
Middlefield a copy of such balance sheets, statements of income
and statements of cash flows.
(B) Quarterly Reports. Furnish to the
Middlefield or its designee promptly following the filing of such
report with the SEC, a copy of each of the Company's Quarterly
Reports on Form 6-K, 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 (subject to normal recurring accruals, which in the
opinion of management are not deemed material and normal year-end
audit adjustments in the case of unaudited interim financial
statements), but all of which may be unaudited. In the event the
Company shall no longer be required to file Quarterly Reports on
Form 6-K, the Company shall, within forty-five (45) days
following the end of each of the first three (3) fiscal year,
deliver to the Middlefield a copy of such balance sheets,
statements of income and statements of cash flows.
(C) SEC Filings. The Company shall deliver
to the Middlefield or its designee copies of each other document
filed with the SEC on a non-confidential basis promptly following
the filing of such document with the SEC.
11.2 Registration Rights. Upon the issuance of any
Shares, the Company and Middlefield will enter into the
Registration Rights Agreement attached hereto as Exhibit C.
11.3 Reservation of Shares. The Company shall duly and
validly reserve for issuance the Common Stock issuable upon
conversion of the Note.
<PAGE> 12
MIDDLEFIELD/3Dlabs CONFIDENTIAL
11.4 Obligations Regarding Confidential Information.
Confidential Information (as defined below) shall not be
disclosed by any party hereto to any third party except in
accordance with the provisions set forth below. For purposes of
this Agreement, the term "Confidential Information" refers to the
following items: the existence of this Agreement, and (ii) the
terms and provisions of this Agreement.
(A) Press Releases, Etc. No announcements
regarding the Confidential Information in a press release,
conference, advertisement, announcement, professional or trade
publication, mass marketing materials or otherwise may be made
without the prior written consent of each of the parties hereto.
Notwithstanding the foregoing, the parties agree that 3Dlabs may
issue a press release within fifteen days after the Effective
Date in a form acceptable to both parties announcing the
existence of this Agreement and the Note.
(B) Permitted Disclosures. Notwithstanding
the foregoing, (i) any party may disclose any of the Confidential
Information to employees, investment bankers, potential acquirors
or acquisition targets, lenders, accountants and attorneys, in
each case only where such persons or entities are under
appropriate nondisclosure obligations; and (ii) Intel may
disclose its investment in the Company and other Confidential
Information to third parties or to public at its sole discretion
and, if it does so, the Company shall have the right to disclose
to third parties any such information disclosed in a press
release or other public announcement by Intel.
(C) Legally Compelled Disclosure. Except to
the extent required by law or judicial or administrative order or
except as provided herein, the Company shall not disclose any
Confidential Information without Intel's prior written approval;
provided, however, that if disclosure of Confidential Information
is required pursuant to law or judicial or administrative order,
the Company will notify Intel promptly before such disclosure and
will use its best efforts to cooperate with Intel to seek
confidential treatment with respect to the disclosure to the
maximum extent possible under law. The Company agrees that it
will provide Intel with drafts of any relevant sections of any
documents, press releases or other filings in which the Company
is required to disclose this Agreement, the transactions
contemplated hereby or any other Confidential Information, at
least three (3) business days prior to the filing or disclosure
thereof, and that the Company will make any changes to such
materials as requested by Intel unless the Company is advised by
counsel that laws require otherwise.
(D) Other Information. The provisions of
this Section shall be in addition to , and not in substitution
for, the provisions of any separate nondisclosure agreement
executed by any of the parties hereto with respect to the
transactions contemplated hereby. Disclosures and exchange of
confidential information between the Company and Intel not
covered by this Section shall be governed by the terms of the
applicable Intel Corporate Non-Disclosure Agreements, executed by
the Company and Intel, and any Confidential Information
Transmittal Records provided in connection therewith.
<PAGE> 13
MIDDLEFIELD/3Dlabs CONFIDENTIAL
12. DEFAULT. For the purposes of this Agreement, the term
"default" shall include any of the following:
(a) The failure by the Company to pay any amounts due
hereunder or under the Note when due;
(b) A material breach by the Company of any other term
or provision of this Agreement or the Note;
(c) The Company's indebtedness for borrowed money is
accelerated as a result of a default or breach of or under any
agreement for such borrowed money, including but not limited to
loan agreements;
(d) The Company breaches the License Agreement and
this Agreement has not been assigned by Middlefield; and
(e) The filing of a petition in bankruptcy or under
any similar insolvency law by the Company, the making of an
assignment for the benefit of creditors, or if any voluntary
petition in bankruptcy or under any similar insolvency law is
filed against the Company and such petition is not dismissed
within sixty (60) days after the filing thereof.
Except for a default pursuant to Section 12(a) or 12(e),
upon each such default, the Company shall have thirty (30) days
to cure such default after receipt of written notice of default
from Middlefield specifying the nature of the Company's default.
If the default is pursuant to Section 12(a) or 12(e) or if the
Company is unable to cure its default within such thirty (30) day
period, Middlefield may, at its option, either convert the Note
pursuant to Section 6.1 or accelerate repayment of the Repayment
Amount in which case the Repayment Amount shall be due and
payable immediately. Upon any default of the Company hereunder,
Middlefield may pursue any legal or equitable remedies that has
available to it.
13. MISCELLANEOUS.
13.1 Governing Law. This Agreement shall be governed
in all respects by and construed in accordance with the laws of
the State of Delaware without regard to provisions regarding
choice of laws.
13.2 Surviving of Certain Representations and
Warranties. The representations and warranties made herein
relating to the due authorization, issuance, government approval,
consent, non-contravention, and purchase of the Shares shall be
applicable to the appropriate parties as of the issuance date of
any Shares. All other representations and warranties herein
shall survive for a period of one year following the Effective
Date.
13.3 Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto whose
rights or obligations hereunder are
<PAGE> 14
MIDDLEFIELD/3Dlabs CONFIDENTIAL
affected by such amendments. This Agreement and the rights and
obligations therein may not be assigned by Middlefield without
the written consent of the Company, except to: (i) a parent
corporation, a subsidiary or affiliate; or (ii) to any third
party in the event of a Company extraordinary event described in
Section 6.2(a). This Agreement and the rights and obligations
therein may not be assigned by the Company, except to a successor
upon a merger, without the written consent of Middlefield.
13.4 Entire Agreement. This Agreement, the Note and
the Exhibits and Schedules hereto and thereto (all of which are
hereby expressly incorporated herein by this reference)
constitute the entire understanding and agreement between the
parties with regard to the subjects hereof and thereof; provided,
however, that nothing in this Agreement shall be deemed to
terminate or supersede the provisions of any confidentiality and
nondisclosure agreements executed by the parties hereto prior to
the date hereof, which agreements shall continue in full force
and effect until terminated in accordance with their respective
terms.
13.5 Notices. Except as may be otherwise provided
herein, all notices and other communications required or
permitted hereunder shall be in writing and shall be conclusively
deemed to have been duly given (a) when hand delivered to the
other party; (b) when received when sent by facsimile at the
address and number set forth below and confirmed by US Mail; (c)
three business days after deposit in the U.S. mail with first
class or certified mail receipt requested postage prepaid and
addressed to the other party as set forth below; or (d) the next
business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth
below with next-business-day delivery guaranteed, provided that
the sending party receives a confirmation of delivery form the
delivery service provider.
To Middlefield: To the Company:
Middlefield Ventures, Inc. 3Dlabs, Ltd.
2200 Mission College Blvd. 480 Potrero Avenue
Santa Clara, CA 95052 Sunnyvale, CA 94086
Attn: Treasurer Attn: VP Finance
with copies to:
Intel Corporation Wilson Sonsini Goodrich &
Rosati
2200 Mission College Blvd. 650 Page Mill Road
Santa Clara, CA 95052 Palo Alto, CA 94304
Attn: CBD Legal Portfolio Mgr. Attn: Steve Bochner, Esq.
Mail Stop SC4-203
c/o Joanne Field
Fax Number: 408-653-8050
<PAGE> 15
MIDDLEFIELD/3Dlabs CONFIDENTIAL
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Portfolio Mgr.
Mail Stop RN6-46
c/o Tamiko Hutchinson
Fax Number: 408-765-6038
Each person making a communication hereunder by facsimile
shall promptly confirm by telephone to the person to whom such
communication was addressed each communication made by it by
facsimile pursuant hereto but the absence of such confirmation
shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13.5 by giving
the other party written notice of the new address in the manner
set forth above.
13.6 Amendments. Any term of this Agreement may be
amended only with the written consent of Company and Middlefield.
13.7 Delays or Omissions. No delay or omission to
exercise any right, power or remedy accruing to a party, upon any
breach or default of any party hereto under this Agreement, shall
impair any such right, power or remedy of such party, nor shall
it be construed to be a waiver of any such breach or default or
any subsequent breach or default. Any waiver, permit, consent or
approval of any kind or character related to this Agreement on
the part of either party must be in writing and shall be
effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or
otherwise afforded to either party shall be cumulative and not
alternative.
13.8 Legal Fees. In the event of any action at law,
suit in equity or arbitration proceeding in relation to this
Agreement or any Shares or other securities of the Company issued
or to be issued, the prevailing party, shall be paid by the other
party a reasonable sum for attorney's fees and expenses for such
prevailing party.
13.9 Finder's Fees. Each party (a) represents and
warrants to the other party hereto that it has retained no finder
or broker in connection with the transactions contemplated by
this Agreement, and (b) hereby agrees to indemnify and to hold
harmless the other party hereto from and against any liability
for any commission or compensation in the nature of a finder's
fee of any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted
liability) for which the indemnifying party or any of its
employees or representatives are responsible.
13.10 Titles and Subtitles. The titles of the
paragraphs and subparagraphs of this Agreement are for
convenience of reference only and are not to be considered in
construing this Agreement.
<PAGE> 16
MIDDLEFIELD/3Dlabs CONFIDENTIAL
13.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
13.12 Severability. Should any provision of this
Agreement be determined to be illegal or unenforceable, such
determination shall not affect the remaining provisions of this
Agreement.
13.13 Dispute Resolution. The parties agree to
negotiate in good faith to resolve any dispute between them
regarding this Agreement. If the negotiations do not resolve the
dispute to the reasonable satisfaction of both parties, then each
party shall nominate one senior officer of the rank of Vice
President or higher as its representative. These representatives
shall, within thirty (30) days of a written request by either
party to call such a meeting, meet in person and shall attempt in
good faith to resolve the dispute. If the disputes cannot be
resolved by such senior managers in such meeting, the parties
agree that they shall, if requested in writing by either party,
meet within thirty (30) days after such written notification for
one day with an impartial mediator. If the one day mediation
does not resolve the dispute to the reasonable satisfaction of
both parties, either party may begin litigation proceedings.
This procedure shall be a prerequisite before taking any
additional action hereunder.
<PAGE> 17
MIDDLEFIELD/3Dlabs CONFIDENTIAL
IN WITNESS WHEREOF, the parties have executed this
Convertible Loan Agreement as of the Effective Date.
MIDDLEFIELD VENTURES, INC. 3DLABS INC., LTD.
By: /s/Robert Perlman By: /s/Osman Kent
-------------------- --------------------
Name: ROBERT PERLMAN Name: OSMAN KENT
Title: PRESIDENT Title: PRESIDENT AND CEO
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
EXHIBIT A
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$7,500,000 Hamilton, Bermuda
December 17, 1999
FOR VALUE RECEIVED, 3Dlabs Inc., Ltd. ("Debtor"), promises to pay
to the order of Middlefield Ventures, Inc. ("Middlefield"), the
principal sum of seven million five hundred thousand dollars
($7,500,000) and to pay interest on the outstanding principal and
accrued interest of this Convertible Promissory Note (this
"Note"), in accordance with Section 2 of this Note. This Note is
delivered in connection with that certain Convertible
Subordinated Note Agreement of even date (the "Note Agreement")
between Debtor and Middlefield.
1. MATURITY. To the extent not previously converted in
accordance with the Note Agreement, the company shall repay the
unpaid principal outstanding balance on December 17, 2004 (the
"Repayment Date"); provided, however, that earlier repayment may
be required pursuant to the Note Agreement. If the Note has not
been earlier converted, all accrued interest will be paid on the
Repayment Date. All payments received shall be applied first
against costs of collection (if any), then against accrued and
unpaid interest, then against principal.
2. DEFINITIONS. All terms not defined herein shall have
the meanings assigned to them in the Note Agreement.
3. TERM OF NOTE; INTEREST; REPAYMENT. The term of this
Note will begin on the December 17, 1999 (the "Effective Date")
and end on the Repayment Date. Interest on the unpaid principal
balance (such unpaid principal balance is referred to as the
"Outstanding Balance") will accrue from the Effective Date at the
rate of four and a half percent (4.5%) per annum, calculated on a
compound basis for a 360 day year and actual days elapsed;
provided, however, that no such accrued interest shall be due and
payable prior to the earlier of the Repayment Date or upon a
conversion event described in Section 6. If this Note has not
been earlier converted, the Company will repay the Outstanding
Balance plus all interest accrued thereon (the sum referred to as
the "Repayment Amount") on the Repayment Date.
4. SUBORDINATION. The indebtedness evidenced by this Note
is hereby expressly subordinated, in right of payment to any
indebtedness at any time owing by the Company to any (i) bank,
financial or lending institution or other non-affiliated entity
primarily in the business of extending credit or other financial
accommodations; (ii) entity that guarantees any obligation of the
Company; and (iii) holder of the Company's trade debt
(collectively, "Senior Indebtedness"). So long as any default by
the Company has occurred under any instrument or agreement
evidencing any Senior Indebtedness, no payment shall be made in
respect of this Note until the Senior Indebtedness has been
repaid in full in cash or other
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
provisions satisfactory to the holders of the Senior Indebtedness
have been made. Until such time, Middlefield shall not ask,
demand or sue for any amounts owning hereunder, accept any
payment or transfer of property in settlement thereof, or take
any action inconsistent with the rights of the holders of the
Senior Indebtedness. Middlefield shall not initiate any
insolvency proceeding against the Company. Notwithstanding the
foregoing, nothing in this Section 4 shall affect Middlefield'
right to convert this Note pursuant to Section 6.
5. PREPAYMENT TERMS. The Repayment Amount may not be
prepaid by the Company for a period of thirty months after the
Effective Date. Beginning thirty months after the Effective
Date, the Company may repay the Repayment Amount to Middlefield.
In addition, prior to initiating any prepayment, the Company will
provide Middlefield at least thirty days prior written notice of
the Company's intention and allow Middlefield to decide whether
it wishes to convert the Repayment Amount pursuant to Section 6.1
prior to any prepayment.
6. CONVERSION; ACCELERATION. The Repayment Amount may be
convertible or accelerated on the following basis.
6.1 Optional Conversion by Middlefield. At any time
beginning six months after the Effective Date, Middlefield may
convert all or a portion of the Repayment Amount into Common
Stock of the Company at a conversion price equal to a 17.5%
premium over the weighted average closing price of the Common
Stock for the fifteen consecutive trading days prior to the
Effective Date which shall be $5.563 (the "Conversion Price").
The shares of Common Stock issued upon such conversion will be
referred to as the "Shares." The Conversion Price would be
subject to adjustment to reflect any stock splits, stock
dividends, recapitalizations, or similar transactions by the
Company. In case of any partial conversion, the Repayment Amount
will be reduced by the dollar amount paid by Middlefield for any
Shares pursuant to such conversion. In addition, upon a partial
conversion, the Company and Middlefield shall cancel the existing
Note and shall execute and deliver a new Note reflecting the
remaining Repayment Amount.
6.2 Optional Acceleration Upon Extraordinary Event.
In the event of: (A) the acquisition of the Company by another
entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization,
merger or consolidation) that results in the transfer of fifty
percent (50%) or more of the outstanding voting power of the
Company; or (B) a sale of all or substantially all of the assets
of the Company, Middlefield may at any time thereafter, at its
option and in its sole discretion, by written notice to the
Company convert the Repayment Amount pursuant to Section 6.1
above, or transfer this Note pursuant to the terms of the Note
Agreement. Notwithstanding the foregoing, if the consideration
per share of the Company's Common Stock in a transaction
described in (A) above is equal to or greater than the Conversion
Price, the Repayment amount shall be automatically converted
pursuant to Section 6.1 above.
6.3 Optional Acceleration by Company. At any date
(the "First Company Acceleration Date") occurring 18 months after
the Effective Date but before 30 months after the
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
Effective Date, the Company will have the option to require
Middlefield to convert all or a portion of the Repayment Amount
pursuant to Section 6.1 above so long as on the First Company
Acceleration Date the weighted average closing price of the
Common Stock for the twenty consecutive trading days prior to the
First Company Acceleration Date is at least 50% greater than the
Conversion Price. There may be more than one First Company
Acceleration Date under the terms of this paragraph so long as
there is still an outstanding Repayment Amount during the time
period associated with a First Company Acceleration Date.
At any date (the "Second Company Acceleration Date")
occurring 30 months after the Effective Date, while any Repayment
amount is still outstanding, the Company will have the option to
require Middlefield to convert all or a portion of the Repayment
Amount pursuant to Section 6.1 above so long as on the Second
Company Acceleration Date the weighted average closing price of
the Common Stock for the twenty consecutive trading days prior to
the Second Company Acceleration Date is equal to or greater than
the conversion price. There may be more than one Second Company
Acceleration Date under the terms of this paragraph so long as
there is still an outstanding Repayment Amount during the time
period associated with a Second Company Acceleration Date.
Upon the occurrence of a Company acceleration date
under this Section 6.3, the Company will provide Middlefield with
a written notice of the Company's intent to effect an
acceleration under this section and such acceleration and related
conversion would occur five business days following such
acceleration date.
7. Default. Debtor will be deemed to be in default
hereunder and the unpaid principal balance of this Note, together
with all accrued interest thereon, will become immediately due
and payable on any default under the Note Agreement in accordance
with the cure provisions contained therein.
8. Miscellaneous.
(a) Debtor hereby waives presentment, demand, protest,
notice of dishonor, diligence and all other notices, any release
or discharge arising from any extension of time, discharge of a
prior party, release of any or all of any security given from
time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.
(b) Middlefield shall not be deemed, by any act or
omission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by Middlefield and
then only to the extent specifically set forth in such writing.
A waiver with reference to one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy as to
a subsequent event. No delay or omission of Middlefield to
exercise any right, whether before or after a default hereunder,
shall impair any such right or shall be construed to be a waiver
of any right or default, and the acceptance at any time by
Middlefield of any past-due amount shall not be deemed to be a
waiver of the right to require prompt payment when due of any
other amounts then or thereafter due and payable.
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
(c) Time is of the essence hereof. Upon any default
hereunder, Middlefield may exercise all rights and remedies
provided for herein and by law or equity, including, but not
limited to, the right to immediate payment in full of this Note.
(d) The remedies of Middlefield as provided herein, or
any one or more of them, or in law or in equity, shall be
cumulative and concurrent, and may be pursued singularly,
successively or together at Middlefield's sole discretion, and
may be exercised as often as occasion therefor shall occur.
(e) It is expressly agreed that if this Note is
referred to an attorney or if suit is brought to collect or
interpret this Note or any part hereof or to enforce or protect
any rights conferred upon Middlefield by this Note or any other
document evidencing or securing this Note, then Debtor promises
and agrees to pay all reasonable costs, including attorneys'
fees, incurred by Middlefield.
(f) If any provisions of this Note would require
Debtor to pay interest hereon at a rate exceeding the highest
rate allowed by applicable law, Debtor shall instead pay interest
under this Note at the highest rate permitted by applicable law.
(g) This Note shall be governed by and construed in
accordance with and the laws of the State of Delaware applicable
to contracts wholly made and performed in the State of Delaware.
Notwithstanding the foregoing, any matters relating to the
Uniform Commercial Code shall be governed by the Uniform
Commercial Code of the State of California.
(h) Middlefield may transfer this Note and its rights
hereunder pursuant to the terms of the Note Agreement.
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
IN WITNESS WHEREOF, Debtor has executed this Convertible
Promissory Note as of the date first above written.
3DLABS INC., LTD
By: -----------------------
Name: -----------------------
Title: -----------------------
[3DLABS INC., LTD. $7,500,000 CONVERTIBLE PROMISSORY NOTE TO
MIDDLEFIELD VENTURES, INC.]
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
EXHIBIT B
LEGAL OPINION
<PAGE> 1
(Letterhead of Conyers Dill & Pearman)
16 December, 1999
Middlefield Ventures, Inc.
2200 Mission College Boulevard
Santa Clara
California 95052
USA
Dear Sirs
3D Labs Inc., Ltd. (the "Company") - Convertible Loan
We have acted as special legal counsel in Bermuda to the Company
in connection with the issue by the Company to Middlefield
Ventures, Inc. (the "Investor") of a convertible loan note
convertible into common shares of the Company.
For the purposes of giving this opinion, we have examined the
following documents:
(i) a draft provided to us by e-mail of a convertible
subordinated note agreement between the Company and the Investor
dated the 17th day of December, 1999;
(ii) a draft provided to us by e-mail of a convertible promissory
note in the amount of $7.5 million from the Company to the
Investor dated the 17th day of December, 1999;
(iii) a draft provided to us by e-mail of a registration rights
agreement between the Company and the Investor dated the 17th day
of December, 1999.
<PAGE> 2
The documents listed in items (i) through (iii) above are herein
sometimes collectively referred to as the "Documents" (which term
does not include any other instrument or agreement whether or not
specifically referred to therein or attached as an exhibit or
schedule thereto).
We have also reviewed the memorandum of association and the bye-
laws of the Company, each certified by Andre Dill as Secretary of
the Company on 16 December 1999, a facsimile copy of minutes of a
meeting held on December 15, 1999 of the Company's Board of
Directors (the "Resolutions") signed by H. Shandell as Assistant
Secretary of the Company and such other documents and made such
enquiries as to questions of law as we have deemed necessary in
order to render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all
signatures and the conformity to the originals of all copies
(whether or not certified) examined by us and the authenticity
and completeness of the originals from which such copies were
taken, (b) that where a document has been examined by us in draft
form, it will be or has been executed in the form of that draft,
and where a number of drafts of a document have been examined by
us all changes thereto have been marked or otherwise drawn to our
attention, (c) the capacity, power and authority of each of the
parties to the Documents, other than the Company, to enter into
and perform its respective obligations under the Documents, (d)
the due execution of the Documents by each of the parties
thereto, and the delivery thereof by each of the parties thereto,
(c) the accuracy and completeness of all factual representations
made in the Documents and other documents reviewed by us, (f)
that the Resolutions remain in full force and effect and have not
been rescinded or amended, (g) that the Company ill use the
proceeds of the convertible promissory note in furtherance of its
business as a holding company, (h) that there is not provision of
the law of any jurisdiction, other than Bermuda, which would have
any implication in relation to the opinions expressed herein, (i)
the validity and binding effect under the laws of the State of
Delaware and the Uniform Commercial Code of the State of
California (the "Foreign Laws") of the Documents which are
expressed to be governed by such Foreign Laws in accordance with
their respective terms, (j) there are reasonable grounds for
believing that the company is, and would after entering into the
Documents be, able to pay its liabilities as they become due, and
the realisable value of its assets, after entering into the
Documents would not thereby be less than the aggregate of its
liabilities, issued share capital and share premium accounts, (k)
the Company will receive money or money's worth of a t least
US$0.01 upon the issue of any shares of the Company to be issued
pursuant to the Documents, (l) the Company is not required to
issue more than 1.5 million common shares of US$0.01 par value
each of the Company pursuant to the Documents.
The obligations of the Company under the Documents (a) will be
subject to the laws from time to time in effect relating to
bankruptcy, insolvency, liquidation, possessory liens, rights of
set off, reorganisation, amalgamation, moratorium or any other
laws or legal procedures, whether of a similar nature or
otherwise, generally affecting the rights of creditors, (b) will
be subject to statutory limitation of the time within which
proceedings may be brought, (c) will be subject to general
principles of equity and, as such, specific performance and
injunctive relief, being equitable remedies, may not be
available, (d) may not be given effect to by a Bermuda court,
<PAGE> 3
whether or not it was applying the Foreign Laws, if and to the
extent they constitute the payment of an amount which is in the
nature of a penalty and not in the nature of liquidated damages.
Notwithstanding any contractual submission to the jurisdiction of
specific courts, a Bermuda court has inherent discretion to stay
or allow proceedings in the Bermuda courts.
We express no opinion as to the enforceability of any provision
of the Documents which provides for the payment of a specified
rate of interest on the amount of a judgement after the date of
judgement or which purports to fetter the statutory powers of the
Company.
We have made no investigation of and express no opinion in
relation to the laws of any jurisdiction other than Bermuda.
This opinion is to be governed by and construed in accordance
with the laws of Bermuda and is limited to and is given on the
basis of the current law and practice in Bermuda. This opinion
is issued solely for your benefit and is not to be relied upon by
any other person, firm or entity or in respect of any other
matter.
On the basis of and subject to the foregoing, we are of the
opinion that:
1. The Company is duly incorporated and existing under the laws
of Bermuda.
2. The Company has the necessary corporate power and authority
to enter into and perform its obligations under the Documents.
The execution and delivery of the Documents by the Company and
the performance by the Company of its obligations thereunder will
not violate the memorandum of association or bye-laws of the
Company nor any applicable law, regulation, order or decree in
Bermuda.
3. The Company has taken all corporate action required to
authorise its execution, delivery and performance of the
Documents. When duly executed and delivered by or on behalf of
the Company, the Documents will constitute the valid and binding
obligations of the Company in accordance with the terms thereof.
4. No order, consent, approval, licence, authorisation or
validation of or exemption by any government or public body or
authority of Bermuda or any sub-division thereof is required to
authorise or is required in connection with the execution,
delivery, performance and enforcement of the Documents, except
such as have been duly obtained in accordance with Bermuda law.
5. It is not necessary or desirable to ensure the
enforceability in Bermuda of the Documents that they be
registered in any register kept by, or filed with, any
governmental authority or regulatory body in Bermuda. However,
to the extent that any of the Documents creates a charge over
assets of the Company, it may be desirable to ensure the priority
in Bermuda of the charge that it be registered in the Register of
Charges in accordance with section 55 of the Companies Act 1981.
On registration, to the extent that Bermuda law governs the
priority of a charge, such charge will have priority in Bermuda
over any
<PAGE> 4
unregistered charges, and over any subsequently registered
charges, in respect of the assets which are the subject of the
charge. A registration fee of $425 will be payable in respect of
the registration.
While there is no exhaustive definition of a charge under Bermuda
law, a charge normally has the following characteristics:
(i) it is a proprietary interest granted by way of security
which entitles the charges to resort to the charged property only
for the purposes of satisfying some liability due to the chargee
(whether from the chargor or a third party), and
(ii) the chargor retains an equity of redemption to have the
property restored to him when the liability has been discharged.
However, as the Documents are governed by the Foreign Laws,
the question of whether they would possess these particular
characteristics would be in determined under the Foreign Laws.
6. The Documents will not be subject to ad valorem stamp duty
in Bermuda.
7. The Choice of the Foreign Laws as the governing law of the
Documents is a valid choice of law and would be recognised and
given effect to in any action brought before a court of competent
jurisdiction in Bermuda, except for those laws (i) which such
court considers to be procedural in nature, (ii) which are
revenue or penal laws or (iii) the application of which would be
inconsistent with public policy, as such term is interpreted
under the laws of Bermuda. The submission in the Documents to
the non-exclusive jurisdiction of the Foreign Courts is valid and
binding upon the Company.
8. Based solely upon a search of the Cause Book of the Supreme
Court of Bermuda conducted at 10:15 a.m. on December 16, 1999
(which would not reveal details of proceedings which have been
filed but not actually entered in the Cause Book at the time of
our search), there are no judgments against the Company, nor any
legal or governmental proceedings pending in Bermuda to which the
Company is subject.
9. The shares of the Company to be issued pursuant to the
Documents, when issued in accordance with the terms of the
Documents, will be validly issued, fully paid and nonassessable
and free of liens, encumbrances or preemptive or similar rights
contained in the Memorandum of Association or Bye-laws of the
Company; provided, however, that such shares may be subject to
restrictions on transfer under state and/or federal securities
laws. "Non-assessability" is not a legal concept under Bermuda
law, but whenever we describe shares as being "non-assessable" we
mean with respect to the shareholders of the Company, in relation
to fully paid shares of the Company and subject to any contrary
provision in any agreement in writing between that Company and
any one of its
<PAGE> 5
Shareholders holding such shares but only with respect to such
shareholder, that such shareholder shall not be bound by an
alteration to the memorandum of association or the bye-laws of
that company after the date upon which they become such
shareholders, if and so far as the alteration requires them to
take or subscribe for additional shares, or in any way increases
their liability to contribute to the share capital of, or
otherwise pay money to, such company.
Yours faithfully,
/s/Conyers Dill & Pearman
CONYERS DILL & PEARMAN
<PAGE>
MIDDLEFIELD/3Dlabs CONFIDENTIAL
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
This Registration Rights Agreement (the "Agreement") is
entered into this 17th day of December 1999 (the "Effective
Date") by and between 3Dlabs Inc., Ltd., a Bermuda company (the
"Company"), and Middlefield Ventures, Inc., ("Middlefield") a
Delaware corporation (together with its successors and permitted
assigns, the "Purchaser").
WHEREAS, the Purchaser has agreed to purchase shares (the
"Shares") of the Company's Common Stock pursuant to that certain
Convertible Subordinated Note Agreement between the Company and
Middlefield dated as of December 17th, 1999 (the "Convertible
Note Agreement").
WHEREAS, in connection with such purchase, the Company and
the Purchaser desire to enter into certain arrangements with
respect to the registration for public sale under the Securities
Act of 1933, as amended (the "Securities Act"), of the Shares.
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Purchaser hereby agree as
follows:
1. Definitions. The following additional terms shall have
the meanings described below:
1.1 "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time
administering the Securities Act.
1.2 "Common Stock" shall mean the shares of common
stock authorized by the Company's Articles of Incorporation and
any additional shares of common stock which may be authorized in
the future by the Company, and any stock into which such Common
Stock may hereafter be changed.
1.3 "Public Offering" shall mean any offering of
Common Stock to the public, either on behalf of the Company or
any of its security holders, pursuant to an effective
registration statement under the Securities Act.
1.4 "Registrable Securities" shall mean (a) the Shares
and (b) any additional securities issued with respect to the
Shares upon any stock split, stock dividend, recapitalization, or
similar event. Registrable Securities shall cease to be
Registrable Securities when (x) a registration statement with
respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement,
(y) all of such securities shall be eligible to be distributed
pursuant to Rule 144 under the Securities Act in a single three-
month period by the holder thereof or (z) such securities shall
have ceased to be outstanding.
1.5 "Registration Expenses" shall mean the expenses
described in Section 6.
<PAGE> 2
1.6 "Securities Act" shall mean the Securities Act of
1933, as amended.
2. Demand Registration.
2.1 Subject to Section 2.3, 2.4 and 2.5, if at any
time six months after the Effective Date, the Company shall
receive a written request therefor from holder or holders of
Registrable Securities, the Company shall prepare and file a
registration statement under the Securities Act covering such
number of Registrable Securities as are the subject of such
request, the minimum number of which shall not be less than the
equivalent of $5,000,000 of such securities' fair market value,
the shall use its best efforts to cause such registration
statement to become effective. Upon the receipt of a
registration request meeting the requirements of this Section
2.1, the Company shall promptly give written notice to all other
record holders of Registrable Securities that such registration
is to be effected. The Company shall include in such
registration statement such additional Registrable Securities as
such other record holders request in writing within thirty (30)
days after the date of the Company's written notice to them. If
(a) the holders of a majority of the Registrable Securities for
which registration has been requested pursuant to this Section
2.1 determines for any reason not to proceed with the
registration at any time before the related registration
statement has been declared effective by the Commission, (b) such
registration statement, if theretofore filed with the Commission,
is withdrawn and (c) the holders of the Registrable Securities
subject to such registration statement agree to bear their own
Registration Expenses incurred in connection therewith and to
reimburse the Company for the Registration Expenses incurred by
it in such connection or if such registration statement, if
theretofore filed with the Commission, is withdrawn at the
initiative of the Company, then the holders of the Registrable
Securities shall not be deemed to have exercised their demand
registration right pursuant to this Section 2.1.
2.2 At the request of the holders of a majority of the
Registrable Securities to be registered, the Company agrees to
use best efforts to ensure that the method of disposition of all
Registrable Securities included in such registration shall be an
underwritten Public Offering by a managing underwriter of
national reputation. The managing underwriter of any such Public
Offering shall be selected by the Company. If in the good faith
judgment of the managing underwriter of such Public Offering, the
inclusion of all of the Registrable Securities the registration
of which has been requested would interfere with their successful
marketing, the number of Registrable Securities to be included
in the underwritten Public Offering may be reduced in the
discretion of the managing underwriter pro rata, among the
requesting holders thereof in proportion to the number of
Registrable Securities included in their respective requests for
registration, provided, however, that the number of Shares of
Registrable Securities shall not be reduced unless and until the
Shares to be offered by any other holder of securities are first
excluded from such registration. Registrable Securities that are
so excluded from such underwritten Public Offering shall be
withheld from sale by the holders thereof for such period, not
exceeding one hundred and twenty (120) days, as the managing
underwriter reasonably determines is necessary to effect such
Public Offering.
<PAGE> 3
2.3 The Company shall be obligated to prepare, file
and cause to be effective not more than one (1) registration
statement pursuant to Section 2.1. However, if the Holders have
used a registration under Section 4 herein, the Company will have
no obligation to prepare, file and cause to be effective any
registration statement pursuant to Section 2.1.
2.4 Notwithstanding the foregoing, in the event that
prior to the preparation and filing of any registration statement
requested pursuant to Section 2.1 or Section 4, there is (a)
material non-public information regarding the Company which the
Board of Directors reasonably determines to be in the best
interests of the Company not to disclose or (b) a significant
business opportunity (including but not limited to the
acquisition or disposition of assets other than in the ordinary
course of business) or any merger, consolidation, tender offer or
other similar transaction available to the Company which the
Board of Directors reasonably determines to be in the Company's
best interests not to disclose, the Company may delay initiating
the preparation and filing of such registration statement for a
period not to exceed ninety (90) days until such time as either
of the events in clauses (a) or (b) no longer exists; provided
however, that the Company may not utilize this right under this
Section and Section 5.13 more than twice in any twelve (12) month
period, and to the extent the Company utilizes this right, the
duration of this Agreement shall extend for the length of such
deferral right.
2.5 Notwithstanding anything to the contrary contained
herein, at any time within thirty (30) days after receiving a
demand for registration pursuant to Section 2.1 or Section 4, the
Company may elect to effect an underwritten primary registration
in lieu of the requested registration. If the Company so elects,
the Company shall give prompt written notice to all holders of
Registrable Securities of its intention to effect such a
registration and shall afford such holders the rights contained
in Section 3 with respect to "piggyback" registrations. In such
event, the demand for registration pursuant to Section 2.1 or
Section 4 shall be deemed to have been withdrawn.
3. Piggyback Registration.
3.1 At any time after the Effective Date, each time
the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for
money of any of its securities by it or any of its security
holders (other than a registration statement on Form S-8, Form S-
4 or other limited purpose form), the Company will give written
notice of its determination to all record holders of Registrable
Securities. Subject to Section 3.2, upon the written request of
a record holder of any Registrable Securities given within 30
days after the date of any such notice from the Company, the
Company will, except as herein provided, cause all Registrable
Securities the registration of which is requested to be included
in such registration statement, all to the extent requisite to
permit the sale or other disposition by the prospective seller or
sellers of the Registrable Securities to be so registered;
provided, however, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any registration; and
provided, further, that if the Company determines not to proceed
with a registration after the registration statement has been
filed with the Commission, and the Company's decision not to
proceed is primarily based upon the anticipated Public Offering
price of the securities to be sold by the Company, the Company
shall promptly complete the registration for the benefit of those
selling security holders
<PAGE> 4
who wish to proceed with a Public Offering of their Registrable
Securities and who agree to bear all of the Registration Expenses
incurred by the Company as the result of such registration after
the Company has decided not to proceed. Notwithstanding the
foregoing, in the discretion of the holders of the Registrable
Securities to be included in the registration (provided that such
holders are the record holders of at least 51% of the Registrable
Securities), such registration may count as a demand registration
under Section 2.1 (if it otherwise meets the requirements of
Section 2.1) for which the Company will pay all Registration
Expenses.
3.2 If any registration pursuant to Section 3.1 is
underwritten in whole or in part, the Company may require that
the Registrable Securities included in the registration be
included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the underwriters.
Notwithstanding the foregoing, in connection with such
underwriting the Holders shall not be required to provide
representations and warranties regarding the Company or
indemnification of the underwriters for material misstatements or
omissions in the registration statement or prospectus for such
offering except for material misstatements and omissions relating
to the Holders. If, in the good faith judgment of the managing
underwriter of the Public Offering, the inclusion of all of the
Registrable Securities originally covered by requests for
registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the
shares offered by the Company, the number of Registrable
Securities to be included in the Public Offering may be reduced
pro rata among the holders of the Registrable Securities
requested to be included in the registration and the holders of
other securities proposed to be included in such registration
(other than securities to be issued by the Company), provided,
however, that the remaining number of Registrable Securities held
by the holders thereof to be included in the Public Offering
shall not be less than 25% of the aggregate number of Registrable
Securities requested to be included in such registration or such
lower percentage in order to accommodate the pro rata inclusion
of any registrable securities of other holders of the Company's
securities with piggyback registration rights.
4. Short Form Registration. Subject to Sections 2.4 and
2.5, in addition to the registration rights provided in Sections
2 and 3, if the Company qualifies for the use of Form S-3 or any
similar registration form then in force, at the request of a
majority of the holders of Registrable Securities then
outstanding, at any time after the Effective Date, the Company
shall at its expense file a registration statement on such form
covering Registrable Securities on behalf of such holder or
holders, provided, however, that the Company shall not be
required to effect any such registration pursuant to this Section
4 if the holders of Registrable Securities propose to sell
Registrable Securities at an aggregate price to the public of
less than $3,500,000. The holders may also require that the
Company offer the Registrable Securities on a delayed and
continuous offering basis on Form F-3 or any similar registration
form then in force subject to the terms of Section 5.2 below.
The Company shall give notice to all the holders of Registrable
Securities who did not join in such request and afford them a
reasonable opportunity to participate in such registration. The
Holder may only make two such requests for registration pursuant
to this Section 4. A Registration pursuant to this Section 4
shall not be permitted if the Holders have made a demand
registration under Section 2.1.
<PAGE> 5
5. Registration Procedures. If and whenever the Company
is required by the provisions of Section 2, Section 3 or Section
4 to effect a registration of Registrable Securities under the
Securities Act, the Company will use reasonable efforts to effect
the registration and sale of such Registrable Securities in
accordance with the intended methods of disposition specified by
the holders participating therein. Without limiting the
foregoing, the Company in each such case will, as expeditiously
as possible:
5.1 In the case of a demand registration pursuant to
Section 2.1 or Section 4, prepare and file with the Commission
the requisite registration statement to effect such registration
(including such audited financial statements as may be required
by the Securities Act or the rules and regulations thereunder)
and use reasonable efforts to cause such registration statement
to become effective; provided, however, that as far in advance as
practical before filing such registration statement or any
amendment thereto, the Company will furnish counsel for the
requesting holders of Registrable Securities with copies of
reasonably complete drafts of all such documents proposed to be
filed, and any such holder shall have the opportunity to object
to any information pertaining solely to such holder that is
contained therein and the Company will make the corrections
reasonably requested by such holder with respect to such
information prior to filing such registration statement or
amendment. Notwithstanding the foregoing, in the event that the
provisions of this Section 5.1 conflict with Section 11.4 of the
Convertible Note Agreement, the terms of Section 11.4 the
Convertible Note Agreement shall govern.
5.2 Prepare and file with the Commission such
amendments and supplements to such registration statement and any
prospectus used in connection therewith as may be necessary to
maintain the effectiveness of such registration statement and to
comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities included in such
registration statement, in accordance with the intended methods
of disposition thereof, until the earlier of (a) such time as all
of the Registrable Securities included in such registration
statement have been disposed of in accordance with the intended
methods of disposition by the holder or holders thereof as set
forth in such registration statement or (b) one hundred eighty
(180) days after such registration statement becomes effective
(or one (1) year after such registration statement becomes
effective in the case of a registration statement on Form F-3 or
any similar registration form then in force).
5.3 Promptly notify each requesting holder and the
underwriter or underwriters, if any:
(a) when such registration statement or any
prospectus used in connection therewith, or any amendment or
supplement thereto, has been filed and, with respect to such
registration statement or any post-effective amendment thereto,
when the same has become effective;
(b) of any written request by the Commission for
amendments or supplements to such registration statement or
prospectus;
(c) of any notification received by the Company
from the Commission regarding the Commission's initiation of any
proceeding with respect to, or of the
<PAGE> 6
issuance by the Commission of, any stop order suspending the
effectiveness of such registration statement; and
(d) of the receipt by the Company of any
notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the applicable
securities or blue sky laws of any jurisdiction.
5.4 Furnish to each holder of Registrable Securities
included in such registration statement such number of conformed
copies of such registration statement and of each amendment and
supplement thereto, and such number of copies of the prospectus
contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 promulgated under the Securities
Act relating to such seller's Registrable Securities, and such
other documents, as such holder may reasonably request to
facilitate the disposition of its Registrable Securities.
5.5 Use reasonable efforts to register or qualify all
Registrable Securities included in such registration statement
under the securities or "blue sky" laws of such states as each
holder of Registrable Securities shall reasonably request within
thirty (30) days following the original filing of such
registration statement and to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and take any other action which may
be reasonably necessary or advisable to enable such holder to
consummate the disposition in such states of the Registrable
Securities owned by such holder, except that the Company shall
not for any such purpose be required (a) to qualify generally to
do business as a foreign corporation in any jurisdiction wherein
it would not but for the requirements of this Section 5.5 be
obligated to be so qualified, (b) to consent to general service
of process in any such jurisdiction or (c) to subject itself to
taxation in any such jurisdiction by reason of such registration
or qualification.
5.6 Use its best efforts to cause all Registrable
Securities included in such registration statement to be
registered with or approved by such other governmental agencies
or authorities as may be necessary to enable each holder thereof
to consummate the disposition of such Registrable securities.
5.7 Notify each holder whose Registrable Securities
are included in 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 any prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and,
subject to Section 5.12, at the request of any such holder
promptly prepare and furnish to such holder a reasonable number
of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the
purchaser of such Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
<PAGE> 7
5.8 Otherwise use its best efforts to comply in all
material respects with all applicable rules and regulations of
the Commission.
5.9 use reasonable efforts to cause all Registrable
Securities included in such registration statement to be listed,
upon official notice of issuance, on any securities exchange or
quotation system on which any of the securities of the same class
as the Registrable Securities are then listed.
5.10 In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement in usual and customary form (including customary
indemnification of the underwriters by the Company), 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; provided,
however, that it shall not be considered customary to require any
of the holders to provide representations and warranties
regarding the Company or indemnification of the underwriters for
material misstatements or omissions in the registration statement
or prospectus for such offering except for material misstatements
or omissions relating to the Holders.
5.11 The Company may require each holder whose
Registrable Securities are being registered to, and each such
holder, as a condition to including Registrable Securities in
such registration statement, shall (i) furnish the Company and
the underwriters with such information and affidavits regarding
such holder and the distribution of such Registrable Securities
as the Company and the underwriters may from time to time
reasonably in connection with such registration statement and
(ii) agree that during the ninety (90) day period following the
effective date of such registration statement, it shall not, to
the extent requested by the Company and the underwriters, sell or
otherwise transfer or dispose of (other than to donees who agree
to be similarly bound) Common Stock of the Company held by it at
any time during such period except Common Stock included in such
registration statement. At any time during the effectiveness of
any registration statement covering Registrable Securities
offered by a holder, if such holder becomes aware of any change
materially affecting the accuracy of the information contained in
such registration statement or the prospectus (as then amended or
supplemented) relating to such holder, it will immediately notify
the Company of such change.
5.12 Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5.7, each
holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder
receives the copies of the supplemented or amended prospectus
contemplated by Section 5.7 and, if so directed by the Company,
shall deliver to the Company all copies, other than permanent
file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities.
5.13 Notwithstanding anything contained herein to the
contrary, in the event that, during the period of time the
Company is required to maintain the effectiveness of the
registration statement relating to the Registrable Securities
there is (a) material non-public information regarding the
Company which the Board of Directors reasonably determines to be
in
<PAGE> 8
the best interests of the Company not to disclose or (b) a
significant business opportunity (including but not limited to
the acquisition or disposition of assets other than in the
ordinary course of business or any merger, consolidation, tender
offer or other similar transaction available to the Company which
the Board of Directors reasonably determines to be in the
Company's best interests not to disclose, the Company may suspend
the effectiveness of such registration statement for a period not
to exceed ninety (90) days until such time as either of the
events in clauses (a) or (b) no longer exists; provided however,
that the Company may not utilize this right under this Section
and Section 2.4 more than twice in any twelve (12) month period.
6. Expenses. With respect to any registration requested
pursuant to Section 2 (except as otherwise provided in such
Section with respect to a registration voluntarily terminated at
the request of the requesting holders of Registrable Securities),
Section 3 (except as otherwise provided in such Section with
respect to a registration continued by holders of Registrable
Securities who wish to proceed with a Public Offering that is
withdrawn by the Company) or Section 4, the Company shall bear
all of the expenses ("Registration Expenses") incident to the
Company's performance of or compliance with its obligations under
this Agreement in connection with such registration including,
without limitation, all registration, filing, securities exchange
listing and NASD fees, all registration, filing, qualification
and other fees and expenses or complying with state securities or
"blue sky" laws, all work processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such
performance and compliance, premiums and other costs of any
policies of insurance against liabilities arising out of the
Public Offering of the Registrable Securities being registered
obtained by the Company (it being understood that the Company
shall have no obligation to obtain such insurance) and any fees
and disbursements of underwriters customarily paid by issuers or
sellers of securities; but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable
Securities and any fees and disbursements of counsel and
accountants to the holders of the Registrable Securities, which
discounts, commissions, transfer taxes, fees and disbursements
shall in any registration be payable by the holders of the
Registrable Securities being registered, pro rata in proportion
to the number of Registrable Securities being sold by them.
7. Indemnification.
7.1 The Company will, to the full extent permitted by
law, indemnify and hold harmless each holder of Registrable
Securities which are included in a registration statement
pursuant to the provisions of this Agreement, and its directors,
officers, shareholders and partners and each other person, if
any, who controls such holder within the meaning of the
Securities Act (collectively the "Related Entities"), from and
against any and all losses, claims, damages, expenses or
liabilities, joint or several (collectively, "Losses") to which
such holder and its Related Entities may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions
or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in a
registration statement prepared and filed hereunder, any
preliminary, final or
<PAGE> 9
summary prospectus contained therein or any amendment or
supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they
were made) not misleading or any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any
federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering
covered by such registration statement, and the Company will
reimburse the holder and any of its Related Entities for any
legal or other expenses reasonably incurred by them in connection
with investigating or defending against any such Losses (or
action or proceeding in respect thereof); provided, however, that
the Company will not be liable in any such case to the extent
that any such Losses arise out of or are based upon (a) an untrue
statement or alleged untrue statement or omission or alleged
omission made in conformity with written information furnished by
such holder specifically for use in the preparation of the
registration statement or (b) such holder's failure to send or
give a copy of the final prospectus to the persons asserting an
untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the
sale of Registrable Securities to such person if such statement
or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or any of its
Related Entities and shall survive the transfer of such
securities by such holder.
7.2 Each holder of Registrable Securities which are
included in a registration pursuant to the provisions of this
Agreement will, to the full extent permitted by law, indemnify
and hold harmless the Company and its Related Entities from and
against any and all Losses to which the Company and its Related
Entities may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue or alleged untrue statement of any
material fact contained in a registration statement prepared and
filed hereunder, any preliminary, final or summary prospectus
contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case
of a prospectus, in the light of the circumstances under which
they were made) not misleading, or arise out of or are based upon
any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities
law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any federal or state securities law in
connection with the offering covered by such registration
statement, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission or violation was so made in reliance
upon and in strict conformity with written information furnished
by such holder specifically for use in the preparation of such
registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of the Company or any of its Related Entities. The holder
of Registrable Securities included in a registration statement
shall also indemnify each other person who participates
(including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors, and
partners, and each other person, if any, who controls any such
participating person within the meaning of the Securities Act to
the same extent as provided above with respect to the Company.
The total amounts payable in indemnity by a holder under this
subsection shall not
<PAGE> 10
exceed in the aggregate the net proceeds received by such holder
in the registered offering which triggered this indemnification
Section 7.2.
7.3 Promptly after receipt by a party indemnified
pursuant to the provisions of Section 7.1 or Section 7.2 of
notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified
party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 7.1 or
Section 7.2, promptly notify the indemnifying party of the
commencement thereof; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party except
to the extent that the indemnifying party is actually prejudiced
by such failure to give notice. In case any such action is
brought against any indemnified party, the indemnifying party
shall have the right to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in
any action include both the indemnified party and the
indemnifying party and the indemnified party reasonably concludes
that there is a conflict of interest that would prevent counsel
for the indemnifying party from also representing the indemnified
party, the indemnified party shall have the right to select
separate counsel to participate in the defense of such action on
behalf of the indemnified party or parties with the fees and
expenses to be paid by the indemnifying party. After notice from
the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of
Section 7.1 or Section 7.2 for any legal or other expense
subsequently incurred by such indemnified party in connection
with the defense thereof unless (a) the indemnified party shall
have employed counsel in accordance with the proviso of the
preceding sentence, (b) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after
the notice of the commencement of the action or (c) the
indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party.
If the indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the
indemnified parties with respect to such claim. No indemnifying
party shall consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to
such claim or litigation without the consent of the indemnified
party. No indemnifying party shall be subject to any liability
for any settlement made without its consent. An indemnified
party may at any time elect to participate in the defense of any
claim or proceeding at its own expense.
7.4 The foregoing indemnity agreements of the Company
and holders are subject to the condition that, insofar as they
relate to any violation (indemnifiable under this Section 7) 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 the Final
<PAGE> 11
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.
7.5 The obligations of the Company and holders under
this Section 7 shall survive until the earlier of the second
anniversary of the completion of any offering of Registrable
Securities in a registration statement or the expiration of any
statutes of limitation or extensions of such statutes.
8. Covenants Relating to Rule 144. If at any time the
Company is required to filed reports in compliance with either
Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended, (the "Exchange Act") the Company will (a) file
reports in compliance with the Exchange Act and (b) comply with
all rules and regulations of the Commission applicable to the use
of Rule 144.
9. Underwritten Offerings. If a distribution of
Registrable Securities pursuant to a registration statement is to
be underwritten, the holders whose Registrable Securities are to
be distributed by such underwriters shall be parties to such
underwriting agreement. No requesting holder may participate in
such underwritten offering unless such holder agrees to sell its
Registrable Securities on the basis provided in such underwriting
agreement and completes and executes all questionnaires, power of
attorney, indemnities and other documents reasonably required
under the terms of such underwriting agreement. Notwithstanding
the foregoing, in connection with such underwriting the holders
shall not be required to provide representations and warranties
regarding the Company or indemnification of the underwriters for
material misstatements or ommissions in the registrations
statement or prospectus for such offering except for material
misstatements or omission relating to the holders. If any
requesting holder disapproves of the terms of an underwriting,
such holder may elect to withdraw therefrom and from such
registration by notice to the Company and the managing
underwriter, and each of the remaining requesting holders shall
be entitled to increase the number of Registrable Securities
being registered to the extent of the Registrable Securities so
withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining requesting holder
bears to the total number of Registrable Securities being
registered by all such remaining requesting holders.
10. Amendment. This Agreement may be amended with the
written consent of the Company and the holders of more than 50%
of the Registrable Securities. Without the prior written consent
of the Purchaser, 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 F-3 registration
rights described in herein) relating to shares of the Company's
Common Stock or any other securities of the Company that are
superior to the rights granted under this Agreement.
<PAGE> 12
11. Termination. This Agreement, and all of the Company's
obligations hereunder (other than its obligations pursuant to
Section 7, which obligations shall survive such termination),
shall terminate upon the earlier to occur of (a) December 17,
2004 if no Shares have been issued on or prior to such date; (b)
two years after the last issuance of Shares contemplated by the
Convertible Note Agreement; or (c) one year after the last
issuance of Shares Contemplated by the Convertible Note Agreement
if the Holders have used a demand registration under Section 2.1
during such time.
12. Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant hereto
may be assigned, in whole or in part (but only with all related
obligations), by a holder of Registrable Securities only to Intel
provided Intel agrees in writing to be bound by and subject to
the terms and conditions hereof. However, in the event of an
acquisition of the Company and the assumption of the Convertible
Note Agreement by the acquirer, Middlefield may assign its rights
under this Agreement, in whole or in part (but only with all
related obligations) to any third party so long as such third
party agrees in writing to be bound by and subject to the terms
and conditions hereof.
13. Miscellaneous.
13.1 This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
13.2 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.
13.3 If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative
authority, the validity of any other provision and of the entire
Agreement shall not be affected thereby.
<PAGE> 13
The parties hereto have executed this Agreement on the day and
year first written above.
3DLABS INC., LTD. MIDDLEFIELD VENTURES, INC.
By: /s/Osman Kent By: /s/Robert Perlman
-------------------- --------------------
Name: OSMAN KENT Name: ROBERT PERLMAN
----------------- -----------------
Title: PRESIDENT AND CEO Title: PRESIDENT
----------------- -----------------
[3DLABS-MIDDLEFIELD REGISTRATION RIGHTS AGREEMENT]
