1
EXHIBIT 4.11
[FORM OF WARRANT]
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THERE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO,
(ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A
NO-ACTION LETTER(S) FROM THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR
(iv) UNLESS PURSUANT TO AN EXEMPTION THEREFROM UNDER RULE 144 OF SUCH
ACT.
AUREAL SEMICONDUCTOR INC.
WARRANT TO PURCHASE [#] SHARES
OF COMMON STOCK (this "WARRANT")
AUREAL SEMICONDUCTOR INC., a Delaware corporation (the
"COMPANY"), hereby certifies that, for value received, [HOLDER], a [ENTITY]
("HOLDER"), or registered assigns, is the registered holder of warrants (the
"WARRANTS") to subscribe for and purchase [NUMBER (#)] shares of the fully paid
and nonassessable Common Stock (as adjusted pursuant to Section 4 hereof, the
"WARRANT SHARES") of the Company, at a purchase price per share equal to Two and
156/1000 Dollars ($2.156)(such price, as adjusted pursuant to Section 4 hereof,
the "WARRANT PRICE"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, (a) the term "COMMON STOCK"
shall mean the Company's presently authorized Common Stock, par value $.001 per
share, and any stock into or for which such Common Stock may hereafter be
converted or exchanged, (b) the term "DATE OF Grant" shall mean June 5, 1998,
and (c) the term "OTHER WARRANTS" shall mean any warrant issued upon transfer or
partial exercise of this Warrant. The term "WARRANT" as used herein shall be
deemed to include Other Warrants unless the context hereof or thereof clearly
requires otherwise.
The Warrants evidenced by this Warrant Certificate are a portion
of a series of like warrants (collectively, the "SERIES WARRANTS") exercisable
for the purchase of an aggregate of One Million Three Hundred Fifty Thousand
(1,350,000) of the Company's Common Stock (the "SERIES WARRANT SHARES") that are
evidenced by certificates of like tenor (the "SERIES WARRANT CERTIFICATES") that
have been issued pursuant to that certain Loan and Security Agreement dated as
of June 5, 1998 (the "LOAN AGREEMENT"), by and among the Company, TransAmerica
Business Credit Corporation and Xxxxxxx Xxxxx Credit Partners, L.P.
1. Term. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through and including
1
2
the earlier of (a) the consummation of (i) any merger or consolidation of the
Company with or into another entity (other than a wholly-owned subsidiary of the
Company) where (A) the Company is not the surviving entity or (B) the Company is
the surviving entity but fifty percent (50%) or more of the capital stock of the
Company after such transaction is held by persons other than holders of the
Company's capital stock prior to such transaction, or (ii) any sale, lease,
exchange or other disposition of all or substantially all of the assets of the
Company (any such event, a "SALE") and (b) the close of business on June 5, 2003
(the "EXPIRATION DATE"); provided, however, that in the event that any portion
of this Warrant is unexercised as of the Expiration Date, the terms of Section
2(b), below, shall apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New
Warrant. Subject to Section 1 hereof, the purchase right represented by this
Warrant may be exercised by the holder hereof, in whole or in part and from time
to time, by the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company and by the payment to the Company of an amount equal to the then
applicable Warrant Price multiplied by the number of Warrant Shares then being
purchased. The person or persons in whose name(s) any certificate(s)
representing shares of Common Stock shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of Common Stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty (30) days after such exercise and, unless this Warrant has been fully
exercised (including without limitation, exercise pursuant to Section 2(b)
below), a new Warrant representing the portion of the Warrant Shares, if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the holder hereof as soon as possible and in any event within such
thirty (30)-day period.
b. Automatic Exercise. In the event that any
portion of this Warrant is unexercised as of the Expiration Date, this Warrant
shall be deemed to have been exercised automatically immediately prior to the
close of business on the Expiration Date (or, in the event that the Expiration
Date is not a business day, the immediately preceding business day), or, if the
Expiration Date is due to a Sale, immediately prior to the consummation of such
Sale (the "AUTOMATIC EXERCISE DATE") and the person entitled to receive the
shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such Warrant Shares as of the close of
business, or, in the event of a Sale, as of immediately prior to the
consummation of the Sale, on such Automatic Exercise Date. This Warrant shall be
deemed to be surrendered to the Company on the Automatic Exercise Date, by
virtue of this Section 2(b) and without any action by the holder of this Warrant
or any other person, and payment to the Company of the then applicable Warrant
Price multiplied by the number of Warrant Shares then being purchased shall be
deemed to be made pursuant to the terms of Section 10.2 below (without payment
by the holder of any exercise price or any cash or other consideration). As
promptly as practicable on or after the Automatic Exercise Date and in any event
within thirty (30) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of Warrant Shares issuable upon such
2
3
exercise.
3. Stock Fully Paid; Reservation of Shares. All Warrant Shares
that may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance pursuant to the terms and conditions herein, be fully paid
and nonassessable, and free from all taxes, liens, charges, and pre-emptive
rights with respect to the issue thereof. The Company shall pay all transfer
taxes, if any, attributable to the issuance of the Warrant Shares upon the
exercise of this Warrant. During the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
a. Adjustment for Initial Errors. The Company hereby
acknowledges that the One Million Three Hundred Fifty Thousand (1,350,000)
Series Warrant Shares constituting the initial number of securities purchasable
upon the exercise of the Series Warrants was based upon the Company's
representations as to the amount of outstanding Common Stock (on a fully diluted
basis) on the Date of Grant, as set forth on Schedule 5.8 to the Loan Agreement
("SCHEDULE 5.8"). If for any reason it shall hereafter be determined by the
holder of any outstanding Warrant that the actual amount of Common Stock
outstanding as of the Date of Grant (on a fully diluted basis) differs from that
set forth on Schedule 5.8, then the holder may notify the Company of such
determination and the Company shall forthwith reissue all of the Series Warrants
with an appropriate proportional adjustment in said number to be effective from
the Date of Grant, provided that such adjustment shall be made only if it
results in an increase to the number of Warrant Shares hereunder.
b. Reclassification. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), the Company shall duly execute and deliver to the holder of
this Warrant a new Warrant (in form and substance satisfactory to the holder of
this Warrant), so that the holder of this Warrant shall have the right to
receive, at a total purchase price not to exceed that payable upon the exercise
of the unexercised portion of this Warrant, and in lieu of the shares of Common
Stock theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or conversion by a holder of the number of shares of
Common Stock then purchasable under this Warrant. Such new Warrant shall provide
for adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this Section 4(b)
shall similarly apply to successive reclassification, changes and conversions.
c. Subdivision or Combination of Shares. If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its outstanding shares of Common Stock, the Warrant Price
shall be proportionately decreased in the case of a subdivision or increased in
the case of a combination, effective at the close of business on the
3
4
date the subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions. If the
Company at any time while this Warrant is outstanding and unexpired shall (i)
pay a dividend with respect to Common Stock payable in Common Stock, or (ii)
make any other distribution with respect to Common Stock (except any
distribution specifically provided for in the foregoing Section 4(b) and Section
4(c)) of Common Stock, then the Warrant Price shall be adjusted, from and after
the date of determination of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
e. Rights Offerings. In case the Company shall, at
any time after the Date of Grant, issue rights, options or warrants to any
person or persons who are at the time of such issuance the holders of equity
securities of the Company, entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible or exchangeable into Common Stock) at a
price per share of Common Stock as determined in accordance with Section 4(i)
below (or having a conversion or exchange price per share of Common Stock if a
security convertible or exchangeable into Common Stock) less than the fair
market value per share of Common Stock on the record date for such issuance (or
the date of issuance, if there is no record date), the Warrant Price to be in
effect on and after such record date (or issuance date, as the case may be)
shall be determined by multiplying the Warrant Price in effect immediately prior
to such record date (or issuance date, as the case may be) by a fraction (i) the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date (or issuance date, as the case may be) plus the number of
shares of Common Stock which the aggregate offering price of the total number of
shares of such Common Stock so to be offered (or the aggregate initial exchange
or conversion price of the exchangeable or convertible securities so to be
offered) would purchase at such fair market value on such record date (or
issuance date, as the case may be) and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding on such record date (or
issuance date, as the case may be) plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which the
convertible securities to be offered are initially exchangeable or convertible).
In case such subscription price may be paid in part or in whole in a form other
than cash, the fair market value of such consideration shall be determined by
the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, provided, that in the event the Board of Directors is unable to make
such a determination or holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under outstanding Warrants disagree in writing with such
determination, then the fair market value of such consideration shall be
determined in the same manner as a Valuation under Section 4(i) below. Such
adjustment shall be made successively whenever such an issuance occurs; and in
the event that such rights, options, warrants, or convertible or exchangeable
securities are not so issued or expire or cease to be convertible or
exchangeable before they are exercised, converted, or exchanged (as the case may
be), then the Warrant Price shall again be adjusted to be the Warrant Price that
would then be in effect if such issuance had not occurred, but such subsequent
adjustment shall not affect the number of Warrant Shares issued upon any
exercise of this Warrant prior to the date such subsequent adjustment is made.
4
5
f. Special Distributions. In case the Company
shall fix a record date for the making of a distribution to all holders of
shares of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation) or
evidences of indebtedness or assets (other than dividends and distributions
referred to in Section 4(c) and Section 4(d) above and other than cash
dividends) or of subscription rights, options, warrants, or exchangeable or
convertible securities containing the right to subscribe for or purchase shares
of any class of equity securities of the Company (excluding those referred to in
Section 4(e) above), the Warrant Price to be in effect on and after such record
date shall be adjusted by multiplying the Warrant Price in effect immediately
prior to such record date by a fraction (i) the numerator of which shall be the
fair market value per share of Common Stock on such record date, less the fair
value (as determined by the Board of Directors of the Company in good faith as
set forth in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights, options,
warrants, or exchangeable or convertible securities applicable to one (1) share
of the Common Stock outstanding as of such record date, provided, that in the
event the Board of Directors is unable to make such a determination or holders
of at least fifty-one percent (51%) of the Warrant Shares issuable under
outstanding Warrants disagree in writing with such determination, then the fair
value of such consideration shall be determined in the same manner as a
Valuation under Section 4(i) below, and (ii) the denominator of which shall be
such fair market value per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Warrant Price shall again be adjusted to be the
Warrant Price which would then be in effect if such record date had not been
fixed, but such subsequent adjustment shall not affect the number of Warrant
Shares issued upon any exercise of this Warrant prior to the date such
subsequent adjustment was made.
g. Other Issuances of Securities. In case the
Company or any subsidiary shall, at any time after the Date of Grant, issue
shares of Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock (excluding (i) shares, rights, options, warrants, or convertible
or exchangeable securities described in Section 11(f) or Section 11(g) hereof
outstanding on the Date of Grant, or issued in any of the transactions described
in Section 4(c), 4(d), 4(e) or 4(f) above, (ii) shares issued upon the exercise
of such rights, options or warrants or upon conversion or exchange of such
convertible or exchangeable securities, (iii) the Series Warrants and any shares
issued upon exercise thereof, (iv) shares issued on conversion or exchange of,
as dividends on, or otherwise in respect of the Company's 8% Series B
Convertible Preferred Stock as constituted on the Date of Grant, (v) up to One
Thousand Five Hundred (1,500) shares of the Company's Series C Preferred Stock
as constituted on the Date of Grant issued on or before the thirtieth day after
the Date of Grant (the "SERIES C SHARES"), (vi) shares issued upon conversion or
exchange of, as dividends on, or otherwise in respect of the Series C Shares and
(vii) up to Eleven Million Seven Hundred Ninety Four Thousand Two Hundred Forty
Four (11,794,244) shares of Common Stock issued or issuable to directors,
officers, employees or consultants of the Company or any subsidiary in
connection with their service as directors, officers, employees or consultants
pursuant to any stock grant, stock option, warrant or other right (the "EMPLOYEE
SHARES")), at a price per share of Common Stock (determined in the case of such
rights, options, warrants, or convertible or exchangeable securities by dividing
(x) the total amount receivable by the Company in consideration of the sale and
issuance of such rights,
5
6
options, warrants, or convertible or exchangeable securities, plus the total
minimum consideration payable to the Company upon exercise, conversion, or
exchange thereof by (y) the total maximum number of shares of Common Stock
covered by such rights, options, warrants, or convertible or exchangeable
securities) lower than the fair market value per share of Common Stock
(determined in accordance with Section 4(i) below) on the date the Company fixes
the offering price of such shares, rights, options, warrants, or convertible or
exchangeable securities, then the Warrant Price shall be adjusted so that it
shall equal the price determined by multiplying the Warrant Price in effect
immediately prior thereto by a fraction (i) the numerator of which shall be the
sum of (A) the number of shares of Common Stock outstanding immediately prior to
such sale and issuance plus (B) the number of shares of Common Stock which the
aggregate consideration received (determined as provided below) for such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such sale and issuance. Such adjustment shall be
made successively whenever such an issuance is made. For the purposes of such
adjustment, the maximum number of shares of Common Stock which the holder of any
such rights, options, warrants or convertible or exchangeable securities shall
be entitled to subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such sale and issuance and the consideration
received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum consideration or premium stated in
such rights, options, warrants, or convertible or exchangeable securities to be
paid for the shares of Common Stock covered thereby. In case the Company shall
sell and issue shares of Common Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then in determining the
price per share of Common Stock and the consideration received by the Company
for purposes of the first sentence of this Section 4(g), the Board of Directors
of the Company shall determine, in good faith, the fair value of said property,
and such determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, provided, that in
the event the Board of Directors is unable to make such a determination or
holders of at least fifty-one percent (51%) of the Warrant Shares issuable under
outstanding Warrants disagree in writing with such determination, then the fair
value of such consideration shall be determined in the same manner as a
Valuation under Section 4(i) below. In case the Company shall sell and issue
rights, options, warrants, or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock together with one
(1) or more other securities as a part of a unit at a price per unit, then in
determining the price per share of Common Stock and the consideration received
by the Company for purposes of the first sentence of this Section 4(g), the
Board of Directors of the Company shall determine, in good faith, which
determination shall be described in a duly adopted board resolution certified by
the Company's Secretary or Assistant Secretary, the fair value of the rights,
options, warrants, or convertible or exchangeable securities then being sold as
part of such unit, provided, that in the event the Board of Directors is unable
to make such a determination or holders of at least fifty-one percent (51%) of
the Warrant Shares issuable under outstanding Warrants disagree in writing with
such determination, then the fair value of such consideration shall be
determined in the same manner as a Valuation under Section 4(i) below. Such
adjustment shall be made successively whenever such an issuance occurs, and in
the event that such rights, options, warrants, or convertible or exchangeable
securities expire or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the Warrant Price
shall again be adjusted to the Warrant Price
6
7
that would then be in effect if such sale and issuance had not occurred, but
such subsequent adjustment shall not affect the number of Warrant Shares issued
upon any exercise of the Warrant prior to the date such subsequent adjustment is
made.
h. Adjustment of Number of Shares. Upon each
adjustment in the Warrant Price, the number of Warrant Shares purchasable
hereunder shall be adjusted, to the nearest whole share, to the product obtained
by multiplying the number of Warrant Shares purchasable immediately prior to
such adjustment in the Warrant Price by a fraction, the numerator of which shall
be the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
i. Determination of Fair Market Value. For
purposes of this Section 4, "FAIR MARKET VALUE" of a share of Common Stock as of
a particular date (the "DETERMINATION DATE") shall mean (i) if shares of Common
Stock are traded on a national securities exchange (an "EXCHANGE"), the weighted
average of the closing prices of a share of the Common Stock of the Company on
the last five (5) trading days prior to the Determination Date reported on such
Exchange as reported in The Wall Street Journal, (ii) if shares of Common Stock
are not traded on an Exchange but trade in the over-the-counter market and such
shares are quoted on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), (A) the average of the last sale prices reported
on NASDAQ or (B) if such shares are an issue for which last sale prices are not
reported on NASDAQ, the average of the closing bid and ask prices, in each case
on the last five (5) trading days (or if the relevant price or quotation did not
exist on any of such days, the relevant price or quotation on the next preceding
business day on which there was such a price or quotation) prior to the
Determination Date as reported in The Wall Street Journal, or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary. If the Board of Directors of the Company is unable to determine any
Valuation (as defined below), or if the holders of at least fifty-one percent
(51%) of all of the Warrant Shares issuable under outstanding Warrants
(collectively, the "REQUESTING HOLDERS") disagree with the Board's determination
of any Valuation by written notice delivered to the Company within five (5)
business days after the determination thereof by the Board of Directors of the
Company is communicated to holders of the Warrants affected thereby, which
notice specifies a majority-in-interest of the Requesting Holders' determination
of such Valuation, then the Company and a majority-in-interest of the Requesting
Holders shall select a mutually acceptable investment banking firm of national
reputation which has not had a material relationship with the Company or any
officer of the Company within the preceding two (2) years, which shall determine
such Valuation. Such investment banking firm's determination of such Valuation
shall be final, binding and conclusive on the Company and the holders of all of
the Warrants issued hereunder and then outstanding. If the Board of Directors of
the Company was unable to determine such Valuation, all costs and fees of such
investment banking firm shall be borne by the Company. If the Requesting Holders
disagreed with the Board's determination of such Valuation, the party whose
determination of such Valuation differed from the Valuation determined by such
investment banking firm by the greatest amount shall bear all costs and fees of
such investment banking firm. For purposes of this Section 4(i), the term
"Valuation" shall mean the determination, to be made initially by the Board of
Directors of the Company, of the fair market value per share of Common Stock
pursuant to clause (iii) above.
7
8
5. Notice of Adjustments. Whenever the Warrant Price or the
number of Warrant Shares purchasable hereunder shall be adjusted pursuant to
Section 4 hereof, the Company shall make a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, which shall be
mailed (without regard to Section 14 hereof, by first class mail, postage
prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Common Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value (as determined in accordance with Section 4(i) above) of a
share of Common Stock on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or
Warrant Shares.
a. Compliance with Securities Act. The holder of
this Warrant, by acceptance hereof, agrees that this Warrant and the shares of
Common Stock to be issued upon exercise hereof are being acquired for investment
and that such holder will not offer, sell or otherwise dispose of this Warrant,
or any shares of Common Stock to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "ACT"). Upon exercise of this Warrant, the holder hereof
shall confirm in writing, by executing the form attached as Schedule 1 to
Exhibit A hereto, that the shares of Common Stock so purchased are being
acquired for investment and not with a view toward distribution or resale. This
Warrant and all shares of Common Stock issued upon exercise of this Warrant
(unless registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S)
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH
THESE SECURITIES WERE ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1) The holder is aware of the Company's
business affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the
8
9
resale in connection with, any "distribution" thereof for purposes of the Act.
(2) The holder understands that this Warrant and
the Warrant Shares have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the holder's investment intent as expressed herein. In
this connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Warrant and the Warrant
Shares, or for a period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this
Warrant and the Warrant Shares must be held indefinitely unless subsequently
registered under the Act and any applicable state securities laws, or unless
exemptions from registration are otherwise available.
(4) The holder is aware of the provisions
of Rule 144 and 144A, promulgated under the Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: the availability of certain public
information about the Company, the resale occurring not less than one (1) year
after the party has purchased and paid for the securities to be sold; the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934, as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.
(5) The holder further understands that at the
time it wishes to sell this Warrant and the Warrant Shares there may be no
public market upon which to make such a sale, and that, even if such a public
market then exists, the Company may not be satisfying the current public
information requirements of Rule 144 and 144A, and that, in such event, the
holder may be precluded from selling this Warrant and the Warrant Shares under
Rule 144 and 144A even if the one (1)-year minimum holding period had been
satisfied.
(6) The holder further understands that in the
event all of the requirements of Rule 144 and 144A are not satisfied,
registration under the Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact that
Rule 144 and 144A is not exclusive, the Staff of the SEC has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rule 144 and 144A will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
b. Disposition of Warrant or Warrant Shares. With
respect to any offer, sale or other disposition of this Warrant, or any Warrant
Shares acquired pursuant to the exercise of this Warrant prior to registration
of such Warrant or Warrant Shares, the holder hereof and each subsequent holder
of this Warrant agrees to give written notice to the Company
9
10
prior thereto, describing briefly the manner thereof, together with a written
opinion of such holder's counsel, if reasonably requested by the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state law then in effect) of this Warrant or such Warrant Shares and indicating
whether or not under the Act certificates for this Warrant or such Warrant
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
applicable law. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of this
Warrant or such Warrant Shares, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
Section 7(b) that the opinion of counsel for the holder is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
after such determination has been made. The foregoing notwithstanding, this
Warrant or such Warrant Shares may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 and 144A under the Act,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 and 144A have been satisfied. Each certificate
representing this Warrant or the Warrant Shares thus transferred (except a
transfer pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with such laws,
unless in the aforesaid opinion of counsel for the holder, such legend is not
required in order to ensure compliance with such laws. The Company may issue
stop transfer instructions to its transfer agent or, if acting as its own
transfer agent, the Company may stop transfer on its corporate books, in
connection with such restrictions.
8. Rights as Stockholders; Information. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of the directors or upon any matter submitted to stockholders at
any meeting thereof, or to receive notice of meetings, or to receive dividends
or subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. The foregoing notwithstanding, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
stockholders.
10
11
9. Registration Rights.
9.1 Demand Registration Rights.
a. Shelf Registration. The Company covenants and
agrees that at any time after receipt of a written request (a "SHELF
REGISTRATION REQUEST") from the holder(s) of the Series Warrants and/or the
Series Warrant Shares (collectively, the "SECURITYHOLDERS") constituting at
least thirty seven and one half percent (37.5%) of the Series Warrant Shares
(determined on an as-exercised basis) to have the Company register the Series
Warrant Shares for sale on a continuous basis pursuant to Rule 415 under the
Act, then the Company shall: (i) promptly deliver written notice (the "SHELF
REGISTRATION Notice") to all other Securityholders of the Company's receipt of
the Shelf Registration Request; (ii) file with the SEC a registration statement
on Form S-3 or any successor form or registration to such form, or, if the
Company is ineligible for Form X-0, Xxxx X-0 or any successor form of
registration to such form, for an offering to be made on a continuous basis
pursuant to Rule 415 (the "SHELF REGISTRATION STATEMENT") covering all of the
outstanding Series Warrant Shares (determined on an as-exercised basis)(the
"REGISTRABLE SECURITIES"), within forty-five (45) days of delivery of the Shelf
Registration Request, (iii) shall use its best efforts to cause such
registration statement to be declared effective within ninety (90) days of
delivery of the Shelf Registration Notice and (iv) shall use its best efforts,
including but not limited to the filing of any and all supplements and
amendments to the Shelf Registration Statement required under applicable rules,
regulations or instructions or reasonably requested by the holders of a majority
of the shares then registered under the Shelf Registration Statement, to keep
the Shelf Registration Statement effective under the Act until all of the Series
Warrant Shares so registered have been sold, subject to Section 9.3(b) below and
applicable law.
11
12
b. Other Demand Registrations. The Company
covenants and agrees that in the event that it fails to file and cause to become
effective a Shelf Registration Statement covering all of the Registrable
Securities within one hundred eighty (180) days after delivery of a Shelf
Registration Request, or if it fails to keep such Shelf Registration Statement
continuously effective until all of the Registrable Securities are sold (subject
to Section 9.3(b) hereof), then at any time after receipt of a written request
(a "DEMAND REGISTRATION REQUEST") from Securityholders holding at least thirty
seven and one half percent (37.5%) of the Registrable Securities stating that
such Securityholders desire and intend to have the Company register all or a
portion of the Registrable Securities held by them on Form S-3, or any successor
form of registration to such form, or, if the Company is ineligible therefore,
Form S-1, or any successor form of registration to such form, the Company shall
give notice (the "REGISTRATION NOTICE") to all of the Securityholders within
thirty (30) days of the Company's receipt of such registration request, the
Company shall cause to be included in such registration all Registrable
Securities requested to be included therein by any such Securityholder within
fifteen (15) days after such Registration Notice is effective (subject to the
provisions of the final sentence of this Section 9.1(a)). After such fifteen
(15)-day period, the Company shall file as promptly as practicable a
registration statement and use its reasonable best efforts to cause such
registration statement to become effective under the Act and remain effective
for six (6) months or such shorter period as may be required if all such
Registrable Securities covered by such registration statement are sold prior to
the expiration of such six (6)-month period; provided, however, that the Company
shall not be obligated to effect any such registration pursuant to this Section
9.1(b) after the Company has effected two (2) such registrations pursuant to
this Section 9.1. For purposes of this Section 9, a registration shall not be
deemed to have been effected unless a registration statement including at least
eighty-five percent (85%) of the Registrable Shares requested to be included
therein has been declared effective and, subject to Section 9.3(b) hereof,
remained effective for a period of six (6) months (or such shorter period as is
permitted in the second sentence of this Section 9.1(b)). The foregoing
notwithstanding, in the event of an underwritten offering pursuant to this
Section 9.1(b), if the managing underwriter of such offering shall advise the
Securityholders in writing that, in its opinion, the distribution of a specified
portion of the securities requested to be included in the registration would
materially adversely affect the distribution of such securities by increasing
the aggregate amount of the offering in excess of the maximum amount of
securities which such managing underwriter believes can reasonably be sold in
the contemplated distribution, then the securities to be included in the
registration shall be included in the following order: (i) first, pro rata among
all of the Registrable Securities requested to be included therein by the
Securityholders according to the number of Registrable Securities requested to
be included by each such Securityholder requesting inclusion therein, and (ii)
second, such other securities requested to be included therein by the Company
and the holders of such other securities, pro rata among the Company and the
holders of such other securities according to the number of securities requested
to be included by the Company and each such holder requesting inclusion therein.
For purposes of this Section 9.1(b), the Securityholders who have requested
registration of Common Stock to be acquired upon the exercise of Warrants not
theretofore exercised shall furnish the Company with an undertaking that they or
the underwriters or other persons to whom such Warrants will be transferred have
undertaken to exercise such Warrants and to sell, transfer or otherwise dispose
of the Shares received upon exercise of such Warrants in such registration.
9.2 Incidental Registration
12
13
a. The Company covenants and agrees with the
Securityholders that in the event that the Company proposes after the Date of
Grant to file a registration statement under the Act with respect to any of its
equity securities (other than pursuant to registration statements on Form S-4 or
Form S-8 or any successor or similar forms), whether or not for its own account,
then the Company shall give written notice of such proposed filing to all
Securityholders promptly (and in any event at least twenty (20) days before the
anticipated filing date). Such notice shall offer to such Securityholders,
together with others who have similar rights, the opportunity to include in such
registration statement such number of Registrable Securities as they may request
(other than Registrable Securities already registered pursuant to a Shelf
Registration Statement). The Company shall direct and use its reasonable best
efforts to cause the managing underwriter of a proposed underwritten offering
(unless the offering is an underwritten offering of a class of the Company's
equity securities other than Common Stock and the managing underwriter has
advised the Company in writing that, in its opinion, the inclusion in such
offering of Common Stock would materially adversely affect the distribution of
such offering) to permit the holders of Registrable Securities requested to be
included in the registration to include such Registrable Securities in the
proposed offering and the Company shall use its reasonable best efforts to
include such Registrable Securities in such proposed offering on the same terms
and conditions as any similar securities of the Company included therein. If the
offering of which the Company gives notice is a public offering involving an
underwriter, the right of a Securityholder to registration pursuant to this
Section 9.2 shall be conditioned upon such Securityholder's participation in
such underwriting and the inclusion of the Registrable Securities to be sold by
such Securityholder in the underwriting. All Securityholders proposing to
distribute Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters. The foregoing notwithstanding, in the case of a
firm commitment offering on underwriting terms appropriate for such a
transaction, other than a registration requested by Securityholders pursuant to
Section 9.1, if any such managing underwriter of recognized standing shall
advise the Company and the Securityholders in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be included in the
following order: (i) first, the securities the Company proposes to include
therein, (ii) second, Registrable Securities pro rata and (iii) third, such
other securities requested to be included, pro rata among the holders of such
other securities according to the number of securities requested to be included
by each such holder requesting inclusion therein.
b. In the event that a holder or holders of
the Company's securities (other than a Securityholder or Securityholders)
requests, pursuant to rights granted to such holder or holders, that the Company
file a registration statement for the public offering of securities and the
Company and the other holders of the Company's securities (including the
Securityholders) who have rights to be included in such registration, request to
be included in such registration and the managing underwriter of such offering
shall advise the Company and the holders requesting inclusion in the offering
that, in its opinion, the distribution of a specified portion of the securities
requested to be included in the registration would materially adversely affect
the distribution of such securities by increasing the aggregate amount of the
offering in
13
14
excess of the maximum amount of securities which such managing underwriter
believes can reasonably be sold in the contemplated distribution then, the
securities to be included in the registration shall be included in the following
order: (i) first, all of the securities requested to be included therein by the
holder or holders making the initial request for the registration, (ii) second,
Registrable Securities and (iii) third, such other securities requested to be
included therein by the Company and the holders of such other securities, pro
rata among the Company and the holders of such other securities according to the
number of securities requested to be included by the Company and each such
holder requesting inclusion therein. For purposes of this Section 9.2(b), the
Company agrees to request for inclusion in the registration only that number of
securities that the Company intends, in good faith, to sell, if all such
securities so requested by the Company were permitted to be included by the
managing underwriter in such registration and sold pursuant thereto.
9.3 Company's Obligations
a. In connection with the registration of
Registrable Securities on behalf of the holders thereof (such Securityholders
being referred to herein as "Sellers") in accordance with Section 9.1 or Section
9.2 above, and in addition to its other obligations under this Section 9, the
Company agrees to:
(i) with respect to any registration
pursuant to Section 9.1(a) or 9.1(b), prepare and file with the Commission a
registration statement on the form specified in such section, with respect to
the Registrable Securities to be registered pursuant to such section, and to use
its best efforts to cause such registration statement to become and remain
effective as provided in such section;
(ii) enter into a cross-indemnity
agreement, in customary form, with each underwriter, if any, and each Seller;
(iii) subject to the provisions of
Section 9.1 and Section 9.2 regarding reductions in Registrable Securities to be
included in a registration, include in the registration statement filed with the
SEC, the Registrable Securities for which requests for registration have been
made (or, in the case of a registration under Section 9.1(a), all such
Registrable Securities); and promptly after filing of such a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to each Seller copies of all such documents filed including, if
requested, documents incorporated by reference in the registration statement;
and notify each Seller of any stop order issued or threatened by the SEC and use
its best efforts to prevent the entry of such stop order or to remove it if
entered;
(iv) prepare and file with the SEC such
amendments of and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective (A) with respect to a registration statement under Section
9.1(b) or Section 9.2, for a period of six (6) months or such shorter period as
may be required if all such Registrable Securities covered by such registration
statement are sold prior to the expiration of such period or (B) with respect to
a Shelf Registration Statement, until all the Registrable Securities covered by
such registration statement are sold, and to otherwise comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended
14
15
methods of disposition by the Sellers set forth in such registration statement;
(v) furnish to each Seller and each
underwriter, if any, without charge, such number of copies of the registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such Seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities proposed to be sold by such Seller;
(vi) use its reasonable best efforts
to register or qualify such Registrable Securities under such other securities
or Blue Sky laws of such jurisdictions as any Seller or any such underwriter
reasonably requests in writing and keep such registrations or qualifications in
effect for so long as such registration statement remains in effect and do any
and all acts and things which may be reasonably necessary or advisable to enable
such Seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Seller; provided, however, that the Company
shall not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Subsection 9.3(a)(vi), or (B) consent to general service of process in any such
jurisdiction;
(vii) notify each Seller, at any time
when a prospectus relating to such Seller's Registrable Securities is required
to be delivered under the Act, of the occurrence of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(viii) cause all such Registrable
Securities to be listed on any Exchange or NASDAQ on which similar securities
issued by the Company are then listed;
(ix) provide a transfer agent,
registrar and CUSIP number for all such Registrable Securities not later than
the effective date of such registration statement;
(x) enter into such customary
agreements (including an underwriting agreement in customary form) and take all
such other actions that the Sellers or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities;
(xi) make available for inspection by
the Sellers and their counsel, any underwriter participating in any disposition
pursuant to such registration statement, and any counsel retained by any such
underwriter, all pertinent financial and other information and corporate
documents of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Seller,
underwriter or counsel in connection with such registration statement;
(xii) with respect to any underwritten
offering, use its
15
16
reasonable best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the Sellers or any
underwriter may reasonably request;
(xiii) with respect to an underwritten
offering, obtain an opinion of counsel to the Company, addressed to the Sellers
and any underwriter, in customary form and including such matters as are
customarily covered by such opinions in underwritten registered offerings of
equity securities as the Sellers or any underwriter may reasonably request, such
opinion to be reasonably satisfactory in form and substance to each Seller; and
(xiv) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this Section 9
notwithstanding, upon receipt by the Securityholders of a written notice signed
by the chief executive officer or chief financial officer of the Company to the
effect set forth below, the Company shall not be obligated during a reasonable
period of time (not to exceed ninety (90) days) thereafter (i) to effect any
registrations pursuant to this Section 9 or (ii) with respect to an effective
Shelf Registration Statement, may suspend the effectiveness of such registration
statement, at any time at which, in the Company's reasonable judgment, (i) there
is a development involving the Company or any of its affiliates which is
material but which has not yet been publicly disclosed or (ii) sales pursuant to
the registration statement would materially and adversely affect an underwritten
public offering for the account of the Company or any other material financing
project or a proposed or pending material merger or other material acquisition
or material business combination or material disposition of the Company's
assets, to which the Company or any of its affiliates is, or is expected to be,
a party. In the event a registration is postponed in accordance with this
Section 9.3(b), (x) the Company must (unless otherwise instructed by those
holders who requested such registration) file the requested registration within
nine (9) months from the date the Company first received the request of the
holders, (y) the Company may not defer the filing of a requested registration or
suspend the effectiveness of a Shelf Registration Statement pursuant to this
Section 9.3(b) more than once in any eighteen (18)-month period, and (z) there
shall be added to any period during which the Company is obligated to keep a
registration effective the number of days for which the registration was
postponed pursuant to this Section 9.3(b).
c. The Company may require that each Seller,
as a condition to registering his, her or its Registrable Securities pursuant
hereto, furnish the Company with such information regarding the distribution of
the Registrable Securities proposed to be sold by such Seller as the Company may
from time to time reasonably request in writing.
d. Each Seller agrees that, upon receipt of
any notice from the Company of the occurrence of any event of the kind described
in Section 9.3(a)(vii) above, such Seller shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Seller's receipt of copies of
the supplemented or amended prospectus contemplated by Section 9.3(a)(vii) above
and, if so directed by the Company, such Seller will deliver to the Company (at
the Company's expense) all
16
17
copies, other than permanent file copies in such Seller's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the period
mentioned in Section 9.3(a)(iv) above shall be extended by the number of days
during the period from and including the date of giving of such notice to and
including the date when each Seller shall have received the copies of the
supplemented or amended prospectus contemplated by Section 9.3(a)(vii) above.
e. The Company shall not file or permit the
filing of any registration or comparable statement which refers to any Seller by
name or otherwise as the Seller of any securities of the Company unless such
reference to such Seller is specifically required by the Act or any similar
federal statute then in force.
9.4 All expenses incident to the Company's
performance of or compliance with this Warrant, including without limitation all
registration and filing fees, fees and expenses relating to filings with any
Exchange, fees and expenses of compliance with securities or Blue Sky laws in
jurisdictions reasonably requested by any Seller or underwriter pursuant to
Section 9.3(a)(vi) (including reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Securities), all word
processing, duplicating and printing expenses, messenger and delivery expenses,
fees and disbursements of counsel for the Company and one (1) counsel for the
Sellers, independent public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incident to such performance) and
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals
attributable to the securities being registered, which discounts, commissions or
fees with respect to any Seller's respective shares shall be paid by such
Seller, and legal expenses of any person other than the Company and the Sellers,
but including liability insurance if the Company so desires), all the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the expense of any liability insurance (if the Company
determines to obtain such insurance) and the fees and expenses incurred in
connection with the listing of the securities to be registered on any Exchange
and/or NASDAQ on which such securities issued by the Company are then listed,
the reasonable fees and expenses of any special experts (including attorneys)
retained by the Company (if it so desires) in connection with such registration
and fees and expenses of other persons retained by the Company (all such
expenses being herein called "REGISTRATION EXPENSES"), shall be borne by the
Company.
9.5 In connection with the preparation and
filing of each registration statement under the Act pursuant to this Section 9,
the Company shall give the Sellers under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such Sellers' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Act.
17
18
9.6 Indemnification
a. In the event of any registration of any
securities of the Company under the Act, the Company shall, and hereby does,
indemnify and hold harmless in the case of any registration statement filed
pursuant to Section 9.1 or Section 9.2, the Seller of any Registrable Securities
covered by such registration statement, its directors, officers, employees and
agents, each other person who participates as an underwriter in the offering or
sale of such Registrable Securities and each other person, if any, who controls
such Seller or any such underwriter within the meaning of the Act against any
losses, claims, damages, or liabilities (or actions or proceedings whether
commenced or threatened in respect thereof), joint or several, to which such
Seller or any such director or officer or employee or agent or underwriter or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (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
any registration statement under which such Registrable Securities were
registered under the Act, any preliminary prospectus, final prospectus or
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 not misleading, and
the Company shall reimburse such Seller and each such director, officer,
employee, agent, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding, whether
commenced or threatened in respect thereof), or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment, or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Seller for the express purpose of use in the preparation thereof
and, provided, further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof), or expense
arises out of such person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, within the time
required by the Act to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission 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
Seller or any such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such Registrable Securities
by such Seller.
b. In the event that the Company includes any
Registrable Securities of a prospective Seller in any registration statement
filed pursuant to Section 9.3, such prospective Seller shall, and hereby does,
indemnify and hold harmless the Company, its directors, officers, employees and
agents, each other person who participates as an underwriter in the offering or
sale of such Registrable Securities and each other person, if any, who controls
the Company or any such underwriter within the meaning of the Act against any
losses, claims, damages, or liabilities (or actions or proceedings whether
commenced or threatened in respect thereof), joint or several, to which the
Company or any such director or officer or employee or underwriter or
controlling person may become subject under the Act or otherwise, insofar as
18
19
such losses, claims, damages, or liabilities (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
any registration statement under which such Registrable Securities were
registered under the Act, any preliminary prospectus, final prospectus or
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 not misleading, and
such prospective Seller shall reimburse the Company and any such director,
officer, employee, agent, underwriter or controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding if, and only
if, such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment, or
supplement. In no event shall the liability of any Seller hereunder be greater
in amount than the dollar amount of the proceeds received by such Seller upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer, employee, agent, underwriter or controlling person and shall survive
the transfer of such Registrable Securities by such Seller.
c. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers, and similar
securities industry professionals participating in the distribution to the same
extent as provided above with respect to information so furnished in writing by
such persons specifically for inclusion in any prospectus or registration
statement.
d. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 9.6, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; provided, however, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 9.6, 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 an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. If, in the
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnified party may assume the defense of such claim, jointly with any other
indemnified party that reasonably determines such conflict of interest to exist,
and the indemnifying party shall be liable to such indemnified parties for the
reasonable legal fees and expenses of one counsel for all such indemnified
parties and for
19
20
other expenses reasonably incurred in connection with the defense thereof
incurred by the indemnified party. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action 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, or a covenant not to xxx, in respect of such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
e. Indemnification and contribution similar to that
specified in this Section 9.6 (with appropriate modifications) shall be given by
the Company and each Seller with respect to any required registration or other
qualification of Registrable Securities under any Federal or state law or
regulation of any governmental authority, other than the Act.
f. The indemnification required by this Section 9.6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
g. If the indemnification provided for in this
Section 9.6 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities, or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of losses, claims, damages, liabilities, or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities, or expenses, as
well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities, and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. In no event shall the liability
of any Seller hereunder be greater in amount than the dollar amount of the
proceeds received by such Seller upon the sale of the Registrable Securities
giving rise to such contribution obligation. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 9.6(g)
were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in
this Section 9.6(g). No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
9.7 Market Stand-Off Agreement. If requested by
the managing underwriter of an offering for which securities of such
Securityholder have been registered, a Securityholder shall not sell or
otherwise transfer or dispose of any Registrable Securities held by such
Securityholder (other than those included in the registration) during such
period following the effective date of such registration as is usual and
customary at such time in similar public
20
21
offerings of similar securities, so long as the officers, directors and all
holders of two percent (2%) or more of the Common Stock of the Company are also
required to so withhold their shares for such period. The obligations described
in this Section 9.7 shall not apply to offerings pursuant to a registration
statement on Form S-4 or Form S-8 or any successor or similar form.
9.8 Assignment of Rights; Termination. This rights
granted under this Section 9 may be assigned to the transferee of any of the
Registrable Securities and will terminate on the five (5) year anniversary of
the Expiration Date.
10. Additional Rights.
10.1 Notice of Sale. In the event that the Company
undertakes to effect a Sale, the Company will use its best efforts to provide to
the holder at least thirty (30) days notice of the terms and conditions of the
proposed transaction. The Company will cooperate with the holder in consummating
the sale of this Warrant in connection with any such transaction.
10.2 Right to Convert Warrant into Common Stock; Net
Issuance.
a. Right to Convert. In addition to and without
limiting the rights of the holder under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion thereof (the
"CONVERSION RIGHT") into shares of Common Stock as provided in this Section 10.2
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to all or a specified portion of shares
subject to this Warrant (the "CONVERTED WARRANT SHARES"), the Company shall
deliver to the holder (without payment by the holder of any exercise price or
any cash or other consideration) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing (i) the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in Section 10.2(b) hereof), which value shall be equal to (A) the
aggregate fair market value of the Converted Warrant Shares issuable upon
exercise of this Warrant (or the specified portion hereof) on the Conversion
Date less (B) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right by (ii) the fair
market value of one (1) share of Common Stock on the Conversion Date.
21
22
Expressed as a formula, such conversion shall be computed as
follows:
X= A - B
-----
Y
Where: X = the number of shares of Common Stock that
may be issued to holder
Y = the fair market value (FMV) of
one (1) share of Common Stock
A = the aggregate FMV (i.e., FMV x
Converted Warrant Shares)
B = the aggregate Warrant Price
(i.e., Converted Warrant Shares x
Warrant Price)
No fractional shares shall be issuable upon exercise of the
Conversion Right, and, if the number of shares to be issued determined in
accordance with the foregoing formula is other than a whole number, the Company
shall pay to the holder an amount in cash equal to the fair market value of the
resulting fractional share on the Conversion Date. For purposes of Section 9 of
this Warrant, shares issued pursuant to the Conversion Right shall be treated as
if they were issued upon the exercise of this Warrant.
b. Method of Exercise. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal office
of the Company together with a written statement specifying that the holder
thereby intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement, or on such later
date as is specified therein (the "CONVERSION DATE"). Certificates for the
shares issuable upon exercise of the Conversion Right and, if applicable, a new
warrant evidencing the balance of the shares remaining subject to this Warrant,
shall be issued as of the Conversion Date and shall be delivered to the holder
within thirty (30) days following the Conversion Date.
c. Determination of Fair Market Value. For
purposes of this Section 10.2, "fair market value" of a share of Common Stock
shall have the meaning set forth in Section 4(i) above.
11. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows:
a. This Warrant has been duly authorized and
executed by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and the rules of
law or principles at equity governing specific performance, injunctive relief
and other equitable remedies;
22
23
b. The Warrant Shares have been duly authorized and
reserved for issuance by the Company and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable;
c. The rights, preferences, privileges and
restrictions granted to or imposed upon the Common Stock and the holders thereof
are as set forth in the certificate of incorporation of the Company, as amended
to the Date of Grant (as so amended, the "Charter"), a true and complete copy of
which has been delivered to the original holder of this Warrant;
d. The execution and delivery of this Warrant are not,
and the issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be, inconsistent with the Charter or
by-laws of the Company, do not and will not contravene, in any material respect,
any governmental rule or regulation, judgment or order applicable to the
Company, and do not and will not conflict with or contravene any provision of,
or constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby;
e. There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its obligations
under this Warrant;
f. The authorized capital stock of the Company
and the capital stock issued and outstanding, or reserved for issuance, are as
set forth on Schedule 5.8. All of the outstanding shares have been validly
issued and are fully paid, nonassessable shares free of preemptive rights;
g. Except as set forth on Schedule 5.8,
there are no subscriptions, rights, options, warrants, or calls relating to any
shares of the Company's capital stock, including any right of conversion or
exchange under any outstanding security or other instrument; and
h. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any security convertible into or exchangeable for
any of its capital stock.
12. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
13. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number given below, and
23
24
telephonic confirmation of receipt is obtained promptly after completion of
transmission, (iii) on the day after delivery to Federal Express or similar
overnight courier, or (iv) on the fifth day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this Warrant.
Any party hereto may change its address for purposes of this Section 13 by
giving the other party written notice of the new address in the manner set forth
herein.
14. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Common Stock issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder, and in addition, the Registration Rights contained in Section 9 above
shall survive the exercise of this Warrant. All agreements of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
19. Remedies. In case any one (1) or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by
24
25
the Company), or the Company (in the case of a breach by a holder), may proceed
to protect and enforce their or its rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Warrant.
20. Acceptance. Receipt of this Warrant by the holder hereof
shall constitute acceptance of and agreement to the foregoing terms and
conditions.
21. No Impairment of Rights. The Company will not, by amendment
of its Charter or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against material impairment.
[Signature page follows.]
25
26
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
AUREAL SEMICONDUCTOR INC.
By:
-----------------------------
Title:
--------------------------
Address: 0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Dated: as of June 5, 1998
27
EXHIBIT A
NOTICE OF EXERCISE
To: AUREAL SEMICONDUCTOR INC.
1. The undersigned hereby elects to purchase ________ shares of
Common Stock of AUREAL SEMICONDUCTOR INC. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
---------------------
(Name)
---------------------
---------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undesigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
---------------------
(Signature)
---------------
(Date)
28
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: AUREAL SEMICONDUCTOR INC.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities
(the "REGISTRABLE SECURITIES"), the undersigned (the "PURCHASER") represents to
the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Registrable
Securities. The Purchaser is purchasing the Registrable Securities for its own
account for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof for purposes of the Registrable
Securities Act of 1933, as amended (the "ACT").
(b) The Purchaser understands that the Registrable Securities
have not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Registrable
Securities and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if the Purchaser's representation was predicated
solely upon a present intention to hold these Registrable Securities for the
minimum capital gains period specified under applicable tax laws, for a deferred
sale, for or until an increase or decrease in the market price of the
Registrable Securities, or for a period of one year or any other fixed period in
the future.
(c) The Purchaser further understands that the Registrable
Securities must be held indefinitely unless subsequently registered under the
Act or unless an exemption from registration is otherwise available. In
addition, the Purchaser understands that the certificate evidencing the
Registrable Securities will be imprinted with the legend referred to in the
Warrant under which the Registrable Securities are being purchased.
29
(d) The Purchaser is aware of the provisions of Rule 144 and
144A, promulgated under the Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: The availability of certain public information about the
Company, the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Registrable Securities
Exchange Act of 1934, as amended) and the amount of securities being sold during
any three-month period not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes
to sell the Registrable Securities there may be no public market upon which to
make such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information requirements of
Rule 144 and 144A, and that, in such event, the Purchaser may be precluded from
selling the Registrable Securities under Rule 144 and 144A even if the one-year
minimum holding period had been satisfied.
(f) The Purchaser further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden or proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
--------------------------
Date:
---------------------
