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EXHIBIT 5.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
February __, 1998, by and among Aureal Semiconductor Inc., a corporation duly
incorporated and existing under the laws of the State of Delaware ("Company"),
Xxxxxx Investments, LLC ("Xxxxxx"), a Georgia limited liability company, and
the subscribers (hereinafter referred to as "Subscribers") to the Company's
offering ("Offering") of up to Five Million Dollars ($5,000,000) of Series A
Preferred Stock (the "Preferred Stock", or the "Convertible Securities")
pursuant to the Regulation D Subscription Agreement between the Company and
each of the Subscribers ("Subscription Agreement").
1. DEFINITIONS. For purposes of this Agreement:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933
(the "Act"), and pursuant to Rule 415 under the Act or any successor rule, and
the declaration or ordering of effectiveness of such registration statement or
document;
(b) For purposes hereof, the term "Registrable Securities"
means the shares of the Company's Common Stock together with any capital stock
issued in replacement of, in exchange for or otherwise in respect of such
Common Stock (the "Common Stock") (i) issued or issuable upon conversion of the
Convertible Securities, (ii) issued or issuable upon exercise of the Warrant to
purchase Common stock issued to Xxxxxx or its designees in connection with the
Offering (the "Warrants"), by Xxxxxx, its designees or any subsequent Holder of
the Warrant or portion thereof and (iii) issued to Xxxxxx in connection with
the Offering.
Notwithstanding the above:
1. Common Stock which would otherwise be deemed to be
Registrable Securities shall not constitute Registrable
Securities if those shares of Common Stock may be resold in a
public transaction without volume limitations or other
material restrictions without registration under the Act,
including without limitation, pursuant to Rule 144 under the
Act; and
2. any Registrable Securities resold in a public transaction
shall cease to constitute Registrable Securities.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock which
have been issued or are issuable upon conversion of the Convertible Securities
and exercise of the then outstanding Warrants at the time of such
determination;
(d) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any permitted assignee thereof;
(e) The term "Initiating Holders" means (i) one or more
holders of Registrable Securities obtained or obtainable upon conversion of at
least Fifty (50) shares of Preferred Stock; and
(f) The term "Due Date" means the date which is four (4)
months after the Last Closing (as defined in the Subscription Agreement) of the
Offering.
EXHIBIT B
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2. REQUIRED REGISTRATION.
(a) The Company shall, within two (2) calendar months
after the Last Closing of the Offering, file a registration statement
("Registration Statement") on Form S-3 (or other suitable form, at the
Company's discretion, but subject to the reasonable approval of Subscribers),
covering the resale of all shares of Registrable Securities then outstanding or
issuable upon conversion of all then outstanding Convertible Securities or upon
exercise of the Warrants. Such Registration Statement shall initially cover the
number of shares issuable upon exercise of the Warrants plus at least Three
Million Seven Hundred Fifty Thousand (3,750,000) shares of Common Stock and
shall cover, to the extent allowed by applicable law in the reasonable opinion
of Company's counsel, such additional indeterminate number of shares of Common
Stock as are required to effect conversion of the Convertible Securities due to
fluctuations in the price of the Company's Common Stock. The Company shall use
its best efforts to have the Registration Statement declared effective as soon
as possible. In the event that the Company determines, which determination
shall be made by the Company within five (5) business days after the last
business day of each month after the Due Date or is notified at any time by a
Holder, that the Registration Statement does not cover a sufficient number of
shares of Common Stock to effect the resales of a number of shares of Common
Stock equal to one hundred twenty five percent (125%) of the number of shares
of Common Stock issuable to each Subscriber upon conversion of all outstanding
Convertible Securities then eligible for conversion, at the Conversion Price
(as defined in the Certificate of Designation of the Series A Preferred Stock,
referred to herein as the "Certificate of Designation") in effect on the last
business day of such month (the "Assumed Conversion Price"), and upon exercise
of all the outstanding Warrants (a "Registration Shortfall"), the Company
shall, within five (5) business days, amend the Registration Statement or file
a new Registration Statement (an "Amended" or "New" Registration Statement,
respectively), as appropriate, to add such number of additional shares as would
be necessary to effect the resales of a number of shares of Common Stock equal
to at least one hundred fifty percent (150%) of the number of shares of Common
Stock issuable to each Subscriber upon conversion of all outstanding
Convertible Securities then eligible for conversion, at the Assumed Conversion
Price then in effect and upon exercise of all of the outstanding Warrants. If
the Registration Statement is not filed within two (2) calendar months after
the Last Closing of the Offering, Company shall pay the Subscribers an amount
equal to one percent (1%) per month of the aggregate amount of outstanding
Convertible Securities held by Subscriber, accruing daily until the
Registration Statement is filed, payable in cash or Common Stock at the
Subscriber's option, as set forth below ("Late Filing Payment"). If the
Registration Statement is not declared effective by the Due Date, or if any
other Amended or New Registration Statement required to be filed hereunder is
not declared effective within two (2) calendar months of the date it is
required to be filed, the Company shall pay the Subscribers an amount equal to
one percent (1%) per month of the aggregate amount of outstanding Convertible
Securities held by Subscriber, accruing daily until the Registration Statement
or a registration statement filed pursuant to Section 3 of this Agreement is
declared effective (the "Late Registration Payment"). Notwithstanding the
above, any Late Registration Payments otherwise due to a Subscriber shall be
reduced by the amount of any Late Filing Payments that have previously been
paid in full to such Subscriber. Any Late Filing Payment or Late Registration
Payment shall be payable in cash or Common Stock, at the Subscriber's option,
as follows: If Subscriber elects to be paid in cash, such Late Filing Payment
or Late Registration Payment shall be paid to such Subscriber by a cashiers
check, no later than ten (10) days after the end of (i) the month in which the
Company receives the Holder's cash payment request and (ii) any subsequent
month(s) for which such amounts accrue. If Subscriber elects to be paid in
Common Stock, such number of shares shall be determined as follows:
Upon conversion of each Convertible Security or any portion thereof,
the Company shall issue to the Subscriber the number of shares of
Common Stock determined as set forth in Section 5(a) of the Certificate
of Designation, plus an additional number of shares of Common Stock
attributable to such Convertible Securities (the "Additional Shares")
determined as set forth below:
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Additional Shares = Late Registration Payment + Late Filing Payment
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Conversion Price
With respect to the Preferred Stock, "Conversion Price" has the definition
ascribed to it in the Certificate of Designation.
Such Additional Shares shall also be deemed "Registrable Securities" as defined
herein. The Company covenants to use its best efforts to use Form S-3 for the
registration required by this Section during all applicable times contemplated
by this Agreement.
(b) The Registration Statement shall be prepared as a
"shelf" registration statement under Rule 415, and shall be maintained
effective until all Registrable Securities cease to exist.
(c) The Company represents that it is presently eligible
to effect the registration contemplated hereby on Form S-3 and will use its
best efforts to continue to take such actions as are necessary to maintain such
eligibility.
3. PIGGYBACK REGISTRATION. If the Registration Statement
described in Section 2 is not effective by the Due Date, and if (but without
any obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holders) any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely for the sale of securities to participants in a Company stock plan or a
registration on Form S-4 or from S-8 promulgated under the Act or any successor
or similar form registering stock issuable upon a reclassification, upon a
business combination involving an exchange of securities or upon an exchange
offer for securities of the issuer or another entity), the Company shall, at
such time, promptly give each Holder written notice of such registration (a
"Piggyback Registration Statement"). Upon the written request of each Holder
given by fax within ten (10) days after mailing of such notice by the Company,
the Company shall cause to be included in such registration statement under the
Act all of the Registrable Securities that each such Holder has requested to be
registered ("Piggyback Registration") to the extent such inclusion does not
violate the registration rights of any other securityholder of the company
granted prior to the date hereof; nothing herein shall prevent the Company from
withdrawing or abandoning the registration statement prior to its
effectiveness. The election of initiating Holders to participate in a Piggyback
Registration Statement shall not impact the amount payable to investors
pursuant to Section 2(a) herein except that the Late Registration Payment shall
cease to accrue as of the date of effectiveness of the Piggyback Registration
Statement.
4. LIMITATION ON OBLIGATIONS TO REGISTER.
(a) In the case of a Piggyback Registration on an
underwritten public offering by the Company, if the managing underwriter
determines and advises in writing that the inclusion in the registration
statement of all Registrable Securities proposed to be included would interfere
with the successful marketing of the securities proposed to be registered by
the Company, then the number of such Registrable Securities to be included in
the registration statement, to the extent such Registrable Securities may be
included in such Piggyback Registration Statement shall be allocated among all
Holders who had requested Piggyback Registration pursuant to the terms hereof,
in the proportion that the number of Registrable Securities which each such
Holder, including Xxxxxx, seeks to register bears to the total number of
Registrable Securities sought to be included by all Holders, including Xxxxxx.
If required by the managing underwriter of such an underwritten public
offering, the Holders shall enter into a reasonable agreement limiting the
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number of Registrable Securities to be included in such Piggyback Registration
Statement and the terms, if any, regarding the future sale of such Registrable
Securities.
(b) In the event the Company believes that shares sought
to be registered under Section 2 or Section 3 by Holders do not constitute
"Registrable Securities" by virtue of Section 1(b) of this Agreement, and the
status of those shares as Registrable Securities is disputed, the Company shall
provide, at its expense, an Opinion of Counsel, reasonably acceptable to the
Holders of the Securities at issue (and satisfactory to the Company's transfer
agent to permit the sale and transfer) that those securities may be sold
immediately, without volume limitation, without registration under the Act, by
virtue of Rule 144 or similar provisions.
5. OBLIGATIONS OF THE COMPANY. Whenever required under
this Agreement to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders of the Registrable Securities covered by such registration statement,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) As promptly as practicable after becoming aware of such
event, notify each Holder of Registrable Securities of the happening of any
event of which the Company has knowledge, as a result of which the prospectus
included in the registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and subject to
Section 6 use its best efforts promptly to prepare a supplement or amendment to
the registration statement to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to each Holder as
such Holder may reasonably request.
(g) Provide Holders with written notice of the date that a
registration statement registering the resale of the Registrable Securities is
declared effective by the SEC, and the date or dates when the Registration
Statement is no longer effective.
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(h) Provide Holders and their representatives the opportunity
to conduct a reasonable due diligence inquiry of Company's pertinent financial
and other records and make available its officers, directors and employees for
questions regarding such information as it relates to information contained in
the registration statement.
6. BLACK OUT. In the event that, during the time that
the Registration Statement is effective, the Company reasonably determines,
based upon advice of counsel, that due to the existence of material non-public
information, disclosure of such material non-public information would be
required to make the statements contained in the Registration Statement not
misleading, and the Company has a bona fide business purpose for preserving as
confidential such material non-public information, the Company shall have the
right to suspend the effectiveness of the Registration Statement, and no Holder
shall be permitted to sell any Registrable Securities pursuant thereto, until
such time as such suspension is no longer advisable; provided, however, that
such time shall not exceed a period of sixty (60) days. As soon as such
suspension is no longer advisable, the Company shall, if required, promptly,
but in no event later than the date the Company files any documents with the
Securities and Exchange Commission ("SEC") referencing such material
information, file with the SEC an amendment to the Registration Statement
disclosing such information and use its best efforts to have such amendment
declared effective as soon as possible.
In the event the effectiveness of the Registration
Statement is suspended by the Company pursuant hereto, the Company shall
promptly notify all Holders whose securities are covered by the Registration
Statement of such suspension, and shall promptly notify each such Holder as
soon as the effectiveness of the Registration Statement has been resumed. The
Company shall be entitled to effect no more than three (3) such suspensions
during the one (1) year period following the Last Closing, no more than two (2)
of which shall occur during the last six (6) months of such one year period.
7. FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Agreement with regard to each selling Holder that such selling Holder shall
furnish to the Company such information regarding Holder, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of its Registrable
Securities or to determine that registration is not required pursuant to Rule
144 or other applicable provision of the Act.
8. EXPENSES. All expenses other than underwriting
discounts and commissions and fees and expenses of counsel to the selling
Holders incurred in connection with registrations, filings or qualifications
pursuant hereto, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, shall be borne by the Company.
9. INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement or a Piggyback Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers and directors of each
Holder, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements
or omissions: (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
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statements therein not misleading, and the Company will reimburse each such
Holder, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 9(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such
Holder, officer, director, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder,
severally and not jointly, will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, any underwriter and any other Holder selling securities in such
registration statement or any of its directors or officers or any person who
controls such Holder, against any losses, claims, damages, or liabilities
(joint or several) to which the Company or any such director, officer,
controlling person, or underwriter or controlling person, or other such Holder
or director, officer or controlling person may become subject, under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any statement or omission in each case to the extent (and only to
the extent) that such statement or omission is made in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration statement; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company and
any such director, officer, controlling person, underwriter or controlling
person, other Holder, officer, director, or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses of one such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
conflicting interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 9.
(d) In the event that the indemnity provided in paragraph
(a) or (b) of this Section 9 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the Company and each Holder agree to
contribute to the aggregate claims, losses, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Holder may
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be subject in such proportion as is appropriate to reflect the relative fault
of the Company and the Holders in connection with the statements or omissions
which resulted in such Losses. Relative fault shall be determined by reference
to whether any alleged untrue statement or omission relates to information
provided by the Company or by the Holders. The Company and the Holders agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each person who
controls a Holder of Registrable Securities within the meaning of either the
Securities Act or the Exchange Act and each director, officer, partner,
employee and agent of a Holder shall have the same rights to contribution as
such holder, and each person who controls the Company within the meaning of
either the Act or the Exchange Act and each director of the Company, and each
officer of the Company who has signed the registration statement, shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The obligations of the Company and Holders under this
Section 9 shall survive the redemption and conversion, if any, of the
Convertible Securities, the completion of any offering of Registrable
Securities in a Registration Statement under this Agreement, and otherwise.
10. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the Act
and the 1934 Act; and
11. AMENDMENT OF REGISTRATION RIGHTS. Any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
a majority of the Registrable Securities provided that the amendment treats all
Holders equally. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder, each future Holder, and the
Company.
12. NOTICES. All notices required or permitted under this
Agreement shall be made in writing signed by the party making the same, shall
specify the section under this Agreement pursuant to which it is given, and
shall be addressed if to (i) the Company at: Aureal Semiconductor Inc., 0000
Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000 Telephone No. (000) 000-0000, Facsimile
No.(000) 000-0000 and (ii) the Holders at their respective last address as the
party as shown on the records of the Company. Any notice, except as otherwise
provided in this Agreement, shall be made by fax and shall be deemed given at
the time of transmission of the fax.
13. TERMINATION. This Agreement shall terminate on the
date all Registrable Securities cease to exist; but without prejudice to (i)
the parties' rights and obligations arising from breaches of this Agreement
occurring prior to such termination (ii) other indemnification obligations
under this Agreement.
14. ASSIGNMENT. No assignment, transfer or delegation,
whether by operation of law or otherwise, of any rights or obligations under
this Agreement by the Company or any Holder, respectively, shall be made
without the prior written consent of the majority in
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interest of the Holders or the Company, respectively; provided that the rights
of a Holder may be transferred to a subsequent holder of the Holder's
Registrable Securities (provided such transferee shall provide to the Company,
together with or prior to such transferee's request to have such Registrable
Securities included in a Piggyback Registration, a writing executed by such
transferee agreeing to be bound as a Holder by the terms of this Agreement);
and provided further that the Company may transfer its rights and obligations
under this Agreement to a purchaser of all or a substantial portion of its
business if the obligations of the Company under this Agreement are assumed in
connection with such transfer, either by merger or other operation of law
(which may include without limitation a transaction whereby the Registrable
Securities are converted into securities of the successor in interest) or by
specific assumption executed by the transferee.
15. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California applicable
to agreements made in and wholly to be performed in that jurisdiction, except
for matters arising under the Act or the Securities Exchange Act of 1934, which
matters shall be construed and interpreted in accordance with such laws.
16. EXECUTION IN COUNTERPARTS PERMITTED. This Agreement
may be executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts, and all
of which together shall constitute one (1) instrument.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this ____ day of February, 1998.
AUREAL SEMICONDUCTOR INC.
By: _______________________________________
Xxxxxxx X. Xxxxxxxxx, President - CEO
Address: Aureal Semiconductor Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone No. (000) 000-0000
Facsimile No. (000) 000-0000
XXXXXX INVESTMENTS, LLC
By: _______________________________________
Xxxx X. Xxxxxx, President
Address: 0000 Xxxxxxx Xxxxxx Xxxx
Xxxx. 000, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
INVESTOR(S)
___________________________________________
Investor's Name
By:________________________________________
(Signature)
Address: ___________________________________________
___________________________________________
___________________________________________
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