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EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 25, 1998, by and among Security Dynamics Technologies, Inc., a
corporation organized under the laws of the State of Delaware (the "Company"),
and each of the parties listed on SCHEDULE I to this Agreement (individually, a
"Stockholder" and collectively, the "Stockholders").
INTRODUCTION
The Company and Intrusion Detection Inc., a corporation organized under
the laws of the State of New York ("ID"), have entered into an Agreement and
Plan of Merger, dated as of March 25, 1998 (the "Merger Agreement"), pursuant to
which, upon and subject to the occurrence of the Closing thereunder, a
subsidiary of the Company shall merge with and into ID (the "Merger") and as
consideration therefor, the Company will issue to the Stockholders shares of
Common Stock, $.01 par value per share ("Common Stock"), of the Company. The
Stockholders wish to have, and the Company is willing to grant to them, certain
rights with respect to the registration of such shares of Common Stock.
In consideration of the mutual covenants and promises contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Stockholders agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Section 1 and elsewhere in this
Agreement, the following terms shall have the following respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"REGISTRABLE SHARES" means (a) the shares of Common Stock issued to
the Stockholders pursuant to the Merger Agreement, including without limitation,
the Escrow Shares, and (b) any other shares of Common Stock of the Company
issued in respect of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events); provided, however, that
shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares (i) upon any sale pursuant to a Registration Statement,
Section 4(1) of the Securities Act or Rule 144 under the Securities Act or upon
any sale in any manner to a person or entity which, by virtue of Section 9 of
this Agreement, is not entitled to the rights provided in this Agreement, (ii)
at such time as all of the Registrable Shares then held by the
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Rightsholders may be sold without restriction as to volume under Rule 144, or
(iii) with respect to a Rightsholder, at such time as all such shares may be
sold by such Rightsholder under Rule 144(k).
"REGISTRATION EXPENSES" means the expenses described in Section 5.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"RIGHTSHOLDERS" means the Stockholders and any other person or
entity who becomes a Rightsholder under this Agreement pursuant to Section 9.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
Other terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Merger Agreement.
2. RESALE REGISTRATION STATEMENT.
(a) Subject to the provisions of paragraph (b) below, on or prior to
the 15th business day following the Closing Date, the Company shall file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings) (the "Resale Registration Statement") registering the Registrable
Shares under the Securities Act and shall use its best efforts to cause the
Resale Registration Statement to become effective promptly following the filing
thereof and to remain effective until the first anniversary of the Closing Date;
provided, however, that (i) the Company shall not be obligated to cause the
Resale Registration Statement to become effective until a date promptly
following the date on which the Company files with the Commission its Quarterly
Report on Form 10-Q for the period ending March 31, 1998 (but in any event by
May 31, 1998), and (ii) each Company Affiliate agrees not to sell any
Registrable Shares pursuant to the Resale Registration Statement until after
such time as the Company has published (within the meaning of Accounting Series
Release No. 130, as amended, of the Commission) financial results covering at
least 30 days of combined operations of the Company and ID (the "Release Date").
(b) Anything contained herein to the contrary notwithstanding, with
respect to the registration required pursuant to this Section 2, the Company may
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include in such registration any issued and outstanding shares of Common Stock
held by others; provided, however, that the inclusion of such issued and
outstanding shares of Common Stock by others in such registration shall not
prevent the Rightsholders from registering the entire number of Registrable
Shares held by them.
3. INCIDENTAL REGISTRATION RIGHTS.
(a) From and after the date hereof, whenever the Company proposes to
file a Registration Statement at any time and from time to time relating to an
offering in which the Company proposes to sell shares of Common Stock for its
own account, it will, prior to such filing, give at least 20 days' written
notice to all Rightsholders of its intention to do so (subject to the
limitations set forth in paragraph (c) below) and, upon the written request of a
Rightsholder or Rightsholders given within 20 days after the Company provides
such notice (which request shall state the intended method of disposition of
such Registrable Shares), the Company shall use its best efforts to cause all
Registrable Shares which the Company has been requested by such Rightsholder or
Rightsholders to register to be registered under the Securities Act to the
extent necessary to permit their sale or other disposition in accordance with
the intended methods of distribution specified in the request of such
Rightsholder or Rightsholders; provided, that (i) the Company shall have the
right to postpone or withdraw any registration effected pursuant to this Section
3 without obligation to any Rightsholder, and (ii) no Company Affiliate may sell
any Registrable Shares pursuant to any such registration until after the Release
Date.
(b) In connection with any offering under this Section 3 involving
an underwriting, the Company shall not be required to include any Registrable
Shares in such underwriting unless the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriter(s) of such
offering. If in the opinion of the managing underwriter(s) of such offering the
registration of all, or part of, the shares of Common Stock (the "Incidental
Shares") which the Rightsholders have requested to be included pursuant to this
Section 3 and/or which other holders of shares of Common Stock or other
securities of the Company entitled to include shares of Common Stock in such
registration have requested to be included would materially and adversely affect
such public offering, then the Company shall be required to include in the
underwriting only that number of such shares, if any, which the managing
underwriter(s) believe(s) may be sold without causing such adverse effect. If
the number of Registrable Shares to be included in the underwriting in
accordance with the foregoing is less than the total number of shares which the
Rightsholders have requested to be included, then (i) the Company shall be
entitled to include all shares that it desires to be registered and (ii) the
Rightsholders who have requested registration and other holders of shares of
Common Stock or other securities of the Company entitled to include shares of
Common Stock in such registration on a parity with the Rightsholders shall
participate in the underwriting
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pro rata based upon their total ownership of shares of Common Stock of the
Company.
(c) Notwithstanding anything in the foregoing to the contrary, the
Company shall not be required to provide any advance notice to Rightsholders in
connection with any offering under this Section 3 involving an underwriting if
the Company has been informed that in the opinion of the managing underwriter(s)
the inclusion of any Incidental Shares in such offering would materially and
adversely affect the offering. In such event, the Company will provide written
notice to all Rightsholders of such managing underwriter's(s') opinion, which
notice need not be given prior to the filing of the applicable Registration
Statement.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
(a) file with the Commission a Registration Statement with respect
to such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective for the period specified in paragraph
(b) below (subject, in the case of the Resale Registration Statement, to the
limitations set forth in Section 2(a) above);
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective for a period ending on the earlier of (i)
the first Anniversary of the Closing Date, and (ii) the date on which all
Registrable Shares registered under such Registration Statement have been sold;
provided, however, that the Company may by written notice require that each
Rightsholder (a "Selling Holder") who is selling shares pursuant to such
registration immediately cease sales of shares pursuant to such Registration
Statement (a "Black Out Requirement") at any time that (A) the Company becomes
engaged in a business activity or negotiation which is not disclosed in the
Registration Statement (or the prospectus included therein) which the Company
reasonably believes must be disclosed therein under applicable law and which the
Company desires to keep confidential for business purposes, the disclosure of
which at such time the Company believes could have an adverse effect on the
Company or its business or prospects or on the successful completion of such
business activity or negotiation or on the market price of the Company's stock,
(B) the Company believes that a particular disclosure so determined to be
required to be disclosed therein would be premature or would adversely affect
the Company or its business or prospects or the market price of the Company's
stock, or (C) the Registration Statement can no longer be used under the
existing rules and regulations promulgated under the Securities Act. The Company
shall not be required to disclose to the Selling Holder(s) the reasons for
requiring a
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suspension of sales hereunder, and the Selling Holder(s) shall not disclose to
any third party (other than financial advisors or other experts consulted by
such Selling Holder(s) with respect to any such sales of shares) the existence
of any such suspension;
(c) as expeditiously as possible furnish to each Selling Holder such
reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the Selling Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the Selling Holder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the Selling Holders shall
reasonably request, and do any and all other acts and things that may reasonably
be necessary or desirable to enable the Selling Holders to consummate the public
sale or other disposition in such states of the Registrable Shares owned by the
Selling Holders; provided, however, that the Company shall not be required in
connection with this paragraph (d) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
Selling Holders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly notify
the Selling Holders and, if requested, the Selling Holders shall immediately
cease making offers of Registrable Shares and return all undistributed
prospectuses to the Company. The Company shall promptly provide the Selling
Holders with revised prospectuses and, following receipt of the revised
prospectuses, the Selling Holders shall be free to resume making offers of the
Registrable Shares.
5. ALLOCATION OF EXPENSES. The Company will pay all Registration Expenses
of all registrations under this Agreement. For purposes of this Section 5, the
term "Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Agreement, including without limitation all registration and
filing fees, exchange listing fees, printing expenses, fees and disbursements of
counsel for the Company, state Blue Sky fees and expenses, the expense of any
special audits incident to or required by any such registration and
disbursements of one counsel for all holders of registration rights
participating in the registration (with such counsel being selected by the
participating holders of registration rights), but excluding underwriting
discounts and selling commissions.
6. INDEMNIFICATION. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless the seller of such Registrable Shares,
each
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underwriter of such Registrable Shares, and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or Blue Sky
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof.
In the event of any registration of any of the Registrable Shares under
the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such seller, specifically for use in connection with the preparation
of such Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of such
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Rightsholders hereunder shall be limited to an amount equal to the proceeds to
each Rightsholder of Registrable Shares sold as contemplated herein.
Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless and to the extent that the Indemnifying
Party is adversely affected by such failure. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of each Indemnified Party, 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 of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
7. INFORMATION BY HOLDER. Each Rightsholder of Registrable Shares included
in any registration shall furnish to the Company such information regarding such
holder and the distribution proposed by such holder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
8. EFFECTIVENESS. This Agreement shall become effective upon the
occurrence of the Closing under the Merger Agreement. If the Merger Agreement
shall be terminated without the occurrence of such a Closing, this Agreement
(and all of the rights and obligations of the parties hereunder) shall terminate
simultaneously.
9. TRANSFERS OF CERTAIN RIGHTS; ADDITIONAL RIGHTSHOLDERS.
(a) GENERAL. The rights granted to each Rightsholder pursuant to the
terms of this Agreement may be transferred by such Rightsholder to another
Rightsholder, to any affiliate of such Rightsholder, or to any member of the
immediate family of such Rightsholder, or any trust established for the benefit
of any
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of the foregoing; provided, however, that in the case of any transfer referred
to in this paragraph (a), the Company is given written notice by the transferor
at the time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which such rights are being assigned.
(b) TRANSFEREES. Any transferee to whom rights hereunder are
transferred shall, as a condition to such transfer, deliver to the Company a
written instrument by which such transferee agrees to be bound by the
obligations imposed upon Rightsholders under this Agreement to the same extent
as if such transferee were a party hereto.
(c) SUBSEQUENT TRANSFEREES. A transferee to whom rights are
transferred pursuant to this Section 9 may not again transfer such rights to any
other person or entity, other than as provided in (a) and (b) above.
10. TRANSFERS PURSUANT TO RULE 144 OR RESALE REGISTRATION STATEMENT. Upon
a Rightsholder's compliance with the applicable provisions of Rule 144 under the
Securities Act or prospectus delivery requirements under the Securities Act, as
the case may be, the Company will take such action as may be required
(including, without limitation, causing legal counsel to issue an appropriate
opinion) to cause its transfer agent to effectuate any transfer of Registrable
Shares properly requested by such Rightsholder, in accordance with the terms and
conditions of Rule 144 or any sale under the Resale Registration Statement.
11. NO ASSIGNMENT. Except as provided in Section 9 hereof, the rights
granted pursuant to this Agreement may not be transferred or assigned by any
Rightsholder.
12. AMENDMENTS. The provisions of this Agreement may be modified or
amended at any time and from time to time only by an agreement or consent in
writing executed by the Company and the holders of a majority of the Registrable
Shares then outstanding; provided, however, that the registration rights granted
under this Agreement may be amended only in a manner which affects all
Registrable Shares in the same fashion.
13. TERMINATION. All of the Company's obligations to register Registrable
Shares under this Agreement and to maintain the effectiveness of any
Registration Statement(s) shall terminate on the first anniversary of the
Closing Date.
14. NOTICES. All notices, requests, consents and other communications
required to be given pursuant to this Agreement shall be in writing and shall be
given by personal delivery or by certified or registered mail, postage prepaid,
return receipt requested. Notices shall be deemed effective when personally
delivered or three days after being so mailed, as the case may be, to the
parties at the following
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respective addresses or at such other address of which either party shall notify
the other in accordance with this Section 14:
The Company: Security Dynamics Technologies, Inc.
00 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: President
With copies to: Security Dynamics Technologies, Inc.
00 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Any
Rightsholder: To the address set forth below
such Rightsholder's name on
SCHEDULE I hereto
With a copy to: Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
15. ENTIRE AGREEMENT; GOVERNING LAW. This Agreement, together with the
Merger Agreement, embodies the entire agreement and understanding between the
parties, and supersedes all prior agreements and understandings relating to the
subject matter hereof. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to conflict of laws provisions.
16. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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17. HEADINGS. The headings of the sections, subsections, and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SECURITY DYNAMICS TECHNOLOGIES, INC.
/s/ Xxxxxx X. X'Xxxxx
-----------------------------
Name: Xxxxxx X. X'Xxxxx
Title: Senior Vice President and
Chief Financial Officer
STOCKHOLDERS:
/s/ Xxxxxx Xxxx
----------------------
Xxxxxx Xxxx
/s/ Xxxxxxx Xxxx
----------------------
Xxxxxxx Xxxx
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SCHEDULE I
LIST OF STOCKHOLDERS
Xxxxxx Xxxx
0000 Xxxxx Xxxxxx
Xxx. 00XX
Xxx Xxxx, XX 00000
Xxxxxxx Xxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
