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EXHIBIT 10.10
STANDBY PURCHASE AGREEMENT
dated as of ____________, 1999
between
AUREAL SEMICONDUCTOR, INC.
and
OAKTREE CAPITAL MANAGEMENT, LLC,
ON BEHALF OF THE ENTITIES NAMED HEREIN
$20,000,000
Rights to Purchase Shares of Common Stock
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STANDBY PURCHASE AGREEMENT
This Standby Purchase Agreement, dated as of __________, 1999
(the "Agreement"), is entered into by and between Oaktree Capital Management,
LLC, a California limited liability company (together with its affiliates,
"Oaktree"), on behalf of each of the entities set forth on Annex A hereto
(collectively [with Oaktree], the "Investors") and Aureal Semiconductor, Inc., a
Delaware corporation (the "Company").
WHEREAS, as part of its recapitalization, the Company proposes
to distribute to its stockholders rights ("Rights") to purchase an aggregate
33,333,333 shares (the "Rights Shares") of its common stock, par value $.001 per
share (the "Common Stock"), at a purchase price of $0.60 per share (the offering
of the Rights Shares pursuant to the Rights being referred to herein as the
"Rights Offering");
WHEREAS, each Right will include a Basic Subscription Privilege,
pursuant to which each stockholder will have the right to purchase its pro rata
portion of Rights Shares at the subscription price of $0.60 per Rights Share
(the "Subscription Price") and an Oversubscription Privilege by which persons
who exercise their Basic Subscription Privilege in full may subscribe to
purchase Rights Shares not purchased by other holders of Rights, subject to
proration;
WHEREAS, the Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-_____) covering the registration of the Rights and the Rights Shares under
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "1933 Act"), including the related preliminary prospectus or
prospectuses. Promptly after the Registration Statement is declared effective by
the Commission, the Company will prepare and file a prospectus in accordance
with the provisions of Rule 430A under the 1933 Act ("Rule 430A") and paragraph
(b) of Rule 424 under the 1933 Act ("Rule 424(b)"). The information included in
such prospectus that is omitted from such registration statement at the time it
becomes effective but that will be deemed to be part of such registration
statement pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement becomes
effective is herein called a "preliminary prospectus." Such registration
statement, including the exhibits and schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it becomes effective, and including the Rule
430A Information, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) under the 1933 Act is
herein referred to as the "Rule 462(b) Registration Statement," and after such
filing the term "Registration Statement" shall be deemed to include the Rule
462(b) Registration Statement. The final prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, in the form that it was first furnished to stockholders of the Company in
connection with the Rights Offering is herein called the "Prospectus." [For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("XXXXX").] All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Registration Statement, any preliminary prospectus or the Prospectus (and
all other
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references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement, any preliminary
prospectus or the Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934, as amended,
together with the rules and regulations thereunder (collectively, the "1934
Act"), incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be;
WHEREAS, the Investors are the holders of all of the issued and
outstanding shares of the Company's 8% Series B Convertible Preferred Stock (the
"Series B Stock"), which is currently convertible into Common Stock at the
conversion price of $2.50 per share of Common Stock; and
WHEREAS, the Company, as part of its recapitalization, has
agreed to issue _____ shares of Common Stock in respect of each share of Series
B Stock submitted for conversion prior to the consummation of the Rights
Offering, up to an aggregate of ______ shares of Common Stock (the "Additional
Shares" and, together with the Rights Shares, collectively, the
"Recapitalization Shares");
WHEREAS, in order to help assure the success of the Rights
Offering, the Investors listed on Annex B hereto (the "Rights Investors") are
willing to commit, on a several and not a joint and several basis, to exercise
all of their Basic Subscription Privileges and their Oversubscription Privileges
to subscribe for a portion of the aggregate of 33,333,333 Rights Shares equal to
the respective percentages appearing next to their names on Annex B hereto,
subject to the terms and conditions set forth herein; and
NOW THEREFORE, in consideration of the mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investors do
hereby agree as follows:
SECTION 1.
The Rights Offering; Standby Purchase Commitment; Additional
Shares.
(a) Subject to the terms and conditions set forth herein, on or before
5:00 p.m. on the expiration date of the Rights (the "Expiration Date"), each of
the Rights Investors will take all such action as may be required to duly and
effectively exercise all of the Basic Subscription Privileges to which it may be
entitled, and to exercise such Rights Investor's proportionate share of the
Oversubscription Privileges such that the aggregate amount of Rights Shares for
which the Oversubscription Privileges are exercised by the Rights Investors is
equal to the Rights Shares less the Rights Investors' aggregate Basic
Subscription Privileges.
(b) The Company will issue ______ Additional Shares in respect of each
share of Series B Stock converted into shares of Common Stock in accordance with
the terms of the Series B Stock prior to the [Expiration Date].
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SECTION 2.
Representations and Warranties.
(a) The Company represents and warrants to each Investor and agrees with
each Investor, as follows:
(i) The Company meets the requirements for use of Form S-3 under
the 1933 Act. The Registration Statement and Rule 462(b) Registration Statement
will be prepared by the Company in conformity with the requirements of the 1933
Act and will be filed with the Commission under the 1933 Act. Prior to the
commencement of the Rights Offering, each of the Registration Statement and any
Rule 462(b) Registration Statement will become effective under the 1933 Act and
no stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement will have been issued and no proceedings for
that purpose will have been instituted or be pending or, to the knowledge of the
Company, contemplated by the Commission, and any request on the part of the
Commission for additional information will have been complied with. A copy of
each of the Registration Statement and the Rule 462(b) Registration Statement
will be delivered by the Company to each Investor. At the respective times the
Registration Statement or any Rule 462(b) Registration Statement become
effective, the Registration Statement and the Rule 462(b) Registration Statement
will comply in all material respects with the requirements of the 1933 Act and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and at the time any post-effective amendments to the
Registration Statement or any Rule 462(b) Registration Statement become
effective, any such post-effective amendments will comply in all material
respects with the requirements of the 1933 Act and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements thereto, at the time
the Prospectus or any such amendment or supplement is issued, will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented, at the Expiration Date will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto,
or when filed pursuant to Rule 424 under the 1933 Act, will comply when so filed
in all material respects with the 1933 Act and each preliminary prospectus and
the final Prospectus will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to XXXXX, except to the extent
permitted by Regulation S-T.
(ii) The accountants who certify the financial statements and
supporting schedules included in the Registration Statement will be independent
public accountants as required by the 1933 Act.
(iii) The financial statements and the supporting schedules
included in the Registration Statement and the Prospectus will present fairly
the financial position of the Company and its consolidated subsidiaries as at
the dates indicated and the results of their
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operations for the periods specified; said financial statements will have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis (except as may otherwise be indicated therein) ("GAAP"); and
the supporting schedules included in the Registration Statement will present
fairly the information required to be stated therein.
(iv) Since [January 3, 1999], (A) there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, (B) there have been no transactions entered into by the Company or its
subsidiaries, other than those in the ordinary course of business, which are
material with respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any kind
(other than the distribution of the Rights and dividends declared and paid with
respect to the Series B Stock) declared, paid or made by the Company on any
class of its capital stock.
(v) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise (a "Material Adverse
Effect").
(vi) Each subsidiary of the Company (as such term is defined in
Rule 405 under the 0000 Xxx) (each a "Subsidiary" and collectively, the
"Subsidiaries"), has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to so
qualify would not have a Material Adverse Effect; except as otherwise disclosed
in the Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(vii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Company's annual report on Form 10-K for the
period ended January 3, 1999, filed with the Commission (except for subsequent
issuances, if any, of additional Series B Stock in payment of dividends payable
with respect to the Series B Stock and issuances pursuant to this Agreement,
pursuant to reservations, agreements or employee benefit plans referred to in
the Registration Statement or pursuant to the exercise of convertible
securities, options or warrants referred to in the Registration Statement). The
shares of issued and outstanding Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; the Common Stock conforms
to all statements relating thereto contained in
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the Registration Statement; and the issuance of the Recapitalization Shares will
not be subject to preemptive or other similar rights.
(viii) The Rights Shares to be issued and sold pursuant to the
Rights have been duly authorized, and when issued and delivered pursuant to the
Rights, against payment of the Subscription Price, will be duly and validly
issued, fully paid and non-assessable.
(ix) The Additional Shares have been duly authorized, and when
issued and delivered in accordance with this Agreement, will be validly issued,
fully paid and non-assessable; and
(x) Neither the Company nor any of its Subsidiaries is in
violation of its charter or by-laws or, except where such default would not have
a Material Adverse Effect, in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Company or any of its subsidiaries is a party or by which it or any of them
may be bound, or to which any of the material property or assets of the Company
or any subsidiary is subject; and the execution, delivery and performance of
this Agreement and the Rights and the consummation of the transactions
contemplated herein and therein and compliance by the Company with its
obligations hereunder and thereunder have been duly authorized by all necessary
corporate action and will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any material property or assets of the Company or any of its
subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any of its subsidiaries
is a party or by which it or any of them may be bound, or to which any of the
material property or assets of the Company or any subsidiary is subject, nor
will such action result in any violation of the provisions of the charter or
by-laws of the Company or any applicable law, rule, regulation, judgment, order
or administrative or court decree.
(xi) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the Company or
any of its subsidiaries, which is required to be disclosed in the Registration
Statement (other than as disclosed therein); all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not material to
the Company and its subsidiaries considered as one enterprise; and there are no
contracts or documents of the Company or any of its subsidiaries which are
required to be filed as exhibits to the Registration Statement by the 1933 Act
which have not been so filed.
(xii) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the offering,
issuance or sale of the Rights Shares hereunder or the issuance of the
Additional Shares, except such as may be required under the 1933 Act or state
securities laws.
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(xiii) This Agreement has been duly authorized, executed and
delivered by the Company. This Agreement constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' right generally. The Board of Directors
of the Company, by action of the Special _______ Committee, has authorized and
approved this Agreement and the transactions relating thereto.
(xiv) The Company and its subsidiaries have good title to all
real and personal properties owned by them, in each case free and clear of all
liens, encumbrances and debts except (A) for property pledged and/or mortgaged
pursuant to the Loan and Security Agreement among the Company and Transamerica
Business Credit Corporation and Xxxxxxx Xxxxx Credit Partners LP[and the other
lenders thereunder], as amended (the "Credit Agreement"), (B) as do not
materially interfere with the use made and proposed to be made of such
properties, (C) as set forth in the Registration Statement or (D) as could not
reasonably be expected to have a Material Adverse Effect.
(xv) Except as set forth in the Registration Statement or this
Agreement, there are no persons with registration or other similar rights to
have any securities (debt or equity) of the Company registered pursuant to the
Registration Statement or otherwise registered by the Company under the 0000
Xxx.
(xvi) The documents to be incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or are filed
with the Commission, complied and will comply as to form in all material
respects with the requirements of the 1934 Act, and, when read together with the
other information in the Prospectus, at the time the Registration Statement and
any amendments thereto becomes effective and at the Closing, will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
(xvii) Except as disclosed in the Registration Statement, and
except as to matters which, individually or in the aggregate, would not have a
Material Adverse Effect, neither the Company nor any of its subsidiaries has any
material liabilities or obligations (absolute, accrued, contingent or otherwise,
known or unknown), other than liabilities incurred in the ordinary course of
business subsequent to January 3, 1999.
(xviii)Except for such matters as would not, individually or in
the aggregate, have a Material Adverse Effect; (i) the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals (the "Permits") of all governmental entities necessary for the
operation of the businesses of the Company and its subsidiaries, (ii) the
Company and its Subsidiaries are in compliance with the terms of the Permits and
(iii) except as disclosed in the Registration Statement, the businesses of the
Company and its Subsidiaries are not being conducted in violation of any law,
ordinance, or regulation of any governmental entity.
(xix) Each of the Company and its Subsidiaries has filed all tax
returns required to be filed by any of them and has paid (or the Company has
paid on its behalf) or has set up an adequate reserve for the payment of, all
taxes required to be paid in respect of the periods covered by such returns. The
information contained in such tax returns is true, complete
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and accurate in all material respects. Neither the Company nor any of its
Subsidiaries is delinquent in the payment of any tax, assessment or governmental
charge except to the extent of reserves established therefor. No deficiencies
for any taxes have been proposed, asserted or assessed against the Company or
any of its subsidiaries that have not been finally settled or paid in full
except to the extent of reserves established therefor. No requests for waivers
of the time to assess any such tax are pending and there are no outstanding
audit examinations, deficiency litigations or refund litigations with respect to
the Company or any of its subsidiaries. The federal income tax returns of the
Company and each of its Subsidiaries consolidated in such returns have been
examined by and settled with the Internal Revenue Service for all years through
December 31, 1997.
(xx) Except as set forth in the Registration Statement, and
except for such matters as will not, individually or in the aggregate, have a
Material Adverse Effect, the Company and each of its Subsidiaries (i) have
obtained all applicable permits, licenses and other authorizations which are
required to be obtained under all applicable Environmental Laws, (ii) are in
compliance with all terms and conditions of such required permits, licenses and
authorizations and also are in compliance with all other applicable requirements
of Environmental Laws and (iii) and are not aware of nor have received notice of
any past activity, practice, incident or action which will give rise to any
common law or statutory liability or otherwise form the basis of any claim,
action, suit or proceeding, against the Company or any of its Subsidiaries based
on or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous or toxic
material or waste.
(xxi) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries.
(b) Any certificate identified as a certificate under this Agreement and
signed by any officer of the Company and delivered to the Investors or to
counsel for the Investors shall be deemed a representation and warranty by the
Company to each Investor as to the matters covered thereby.
(c) Each Investor severally represents and warrants to the Company as of
the date hereof, and agrees with the Company, as follows:
(i) This Agreement has been duly authorized, executed and
delivered by such Investor.
(ii) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein and compliance by
such Investor with its obligations hereunder have been duly authorized by all
necessary action and will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any material property or assets of such Investor or any of its
subsidiaries pursuant to, any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which such Investor is a party or
by which it may be bound, or to which
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any of the material property or assets of such Investor is subject, nor will
such action result in any violation of the provisions of the charter or by-laws,
or comparable governing documents of such Investor or any applicable law, rule,
regulation, judgment, order or administrative or court decree.
(iii) Such Investor has, or has available to it, sufficient
funds for the performance of its obligations pursuant to this Agreement.
SECTION 3.
Closing.
(a) On or prior to 10:00 a.m. on the Expiration Date, a closing (the
"Closing") shall be had at the offices of Milbank, Tweed, Xxxxxx & XxXxxx,
counsel for the Investors, at 000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx or at such other place as the parties may agree. At the
Closing, (i) the Company shall deliver, or cause to be delivered, to the
Investors (A) each of the documents and agreements necessary to evidence
satisfaction of the conditions to the Investors' obligations as set forth
herein, including the documents required to be delivered pursuant to Section 5
hereof; and (ii) each Rights Investor shall (A) deliver to the Company all
documents necessary for the exercise of its Basic Subscription Privileges and
Oversubscription Privileges in accordance with Section 1 hereof and (B) make
payment in full of the exercise price for its Basic Subscription Privileges, by
wire transfer of funds to the subscription agent for the Rights Offering.
(b) As promptly as practicable, but in no event later than [five]
business days following the Expiration Date, the Company shall notify each
Rights Investor of the amount of Rights Shares required to be purchased by it
pursuant to its Oversubscription Privileges. Not later than [three] business
days following receipt of such notice, each Rights Investor shall make payment
in full of the full purchase price for the foregoing Rights Shares by wire
transfer of funds to the subscription agent for the Rights Offering.
(c) Delivery of the Rights Shares to the Rights Investors shall by made
by the subscription agent for the Rights Offering in accordance with the terms
and provisions of the Rights Offering. Delivery of the Additional Shares shall
be made to the Investors at the Closing through [delivery of certificates
evidencing such Additional Shares with all applicable tax stamps attached,
registered in the name or names requested in writing by the Investors at least
one business day prior to the Closing].
SECTION 4.
Covenants of the Company.
The Company covenants with each Investor as follows:
(a) The Company shall make all necessary filings with respect to the
transactions contemplated by this Agreement, under the 1933 Act and the 1934
Act, under applicable blue sky or similar securities laws and shall use all
reasonable efforts to obtain required approvals and clearances with respect
thereto. The Company will comply with the
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requirements of Rule 430A and will notify the Investors immediately, and confirm
the notice in writing, (i) when any post-effective amendment to the Registration
Statement shall become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission on the Registration Statement, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
and (v) of the suspension of the qualification of the Rights Shares for offering
or sale in any jurisdiction, or the initiation or threatening of any proceedings
for any such purpose. The Company will promptly effect the filings necessary
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will prepare and file the Registration Statement or any
amendments thereto (including any filing under Rule 462(b)) or any amendment or
supplement to either the prospectus included in the Registration Statement at
the time it becomes effective or to the Prospectus, whether pursuant to the 1933
Act, the 1934 Act or otherwise, will furnish the Investors with copies of the
Registration Statement and any such amendment or supplement a reasonable amount
of time prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to which any
Investor or counsel for the Investors shall reasonably object, provided that
such objection shall not prevent the filing of any such amendment or supplement
which, in the opinion of counsel for the Company, is required to be filed by the
requirements of the 1933 Act or the 1933 Act Regulations.
(c) If any event shall occur as a result of which it is necessary, in
the opinion of counsel for the Investors, to amend or supplement the Prospectus
in order to make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to comply
with the 1933 Act or the 1934 Act, the Company will forthwith amend or
supplement the Prospectus (in form and substance satisfactory to counsel for the
Investors and in compliance with the 1933 Act) so that, as so amended or
supplemented, the Prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary to make the statement therein,
in the light of the circumstances existing at the time it is delivered to a
purchaser, not misleading and will comply with the 1933 Act and the 1934 Act,
and the Company will furnish to the Investors a reasonable number of copies of
such amendment or supplement.
(d) The Company will use the net proceeds received by it from the sale
of the Rights Shares to repay amounts outstanding under the Credit Agreement.
(e) If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A
under the 1933 Act, then immediately following the execution of this Agreement,
the Company will prepare, and file
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or transmit for filing with the Commission in accordance with such Rule 430A and
Rule 424(b) of the 1933 Act Regulations, copies of an amended Prospectus, or, if
required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
(f) The Company and its Subsidiaries shall afford to the Investors and
their accountants, counsel and other representatives reasonable access during
normal business hours (and at such other times as the parties may mutually
agree) throughout the period prior to the Closing to all of its properties,
books, contracts, commitments, records and personnel and, during such period,
the Company shall furnish promptly to the Investors (i) a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal or state securities laws and (ii) all other information concerning
its business, properties and personnel as such Investor may reasonably request.
(g) [The Company shall enter into an amendment to its Credit Agreement
with the other parties thereto on substantially the terms set forth on Annex C.
The Company also shall seek to amend the Credit Agreement as it deems necessary
or appropriate so that none of the transactions contemplated hereby, including,
without limitation, the issuance and sale of the Rights Shares and the issuance
of the Additional Shares, will constitute or result in a Default ( as defined in
the Credit Agreement) or an Event of Default ( as defined in the Credit
Agreement) under the Credit Agreement as so amended and otherwise as the Company
or the Investors may deem appropriate.]
(h) The Company shall take all action necessary to (i) amend its
[DESCRIBE STOCK OPTION PLAN] so that the number of shares available for grant
thereunder and all other stock-based compensation plans of the Company shall be
increased to an aggregate amount not to exceed 25% of the outstanding shares of
Common Stock on a fully-diluted basis and to provide that no right to exercise
with respect to any awards granted thereunder shall or may be accelerated as a
result of the transactions contemplated under this Agreement and (ii) effect a
one-for-fifteen reverse stock split immediately following consummation of the
Rights Offering pursuant to the terms hereof.
(i) In addition to and without limiting the Company's covenants
contained in Section 5(a), the Company will (i) take promptly all actions
necessary to make the filings required of the Company under Section 7A of the
Xxxxxxx Act (Title II of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended) and the rules and the regulations thereunder (collectively,
the "HSR Act"), (ii) comply at the earliest practicable date with any request
for additional information received by the Company from the Federal Trade
Commission or the Antitrust Division of the Department of Justice pursuant to
the HSR Act and (iii) cooperate with the Rights Investors in connection with
Rights Investors' filing under the HSR Act and in connection with resolving any
investigation or other regulatory inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal Trade Commission
or the Antitrust Division of the Department of Justice or state attorneys
general.
(j) [The Company will reimburse the Investors for all out-of-pocket
expenses reasonably incurred by them in connection with this Agreement and the
consummation of the transactions contemplated hereby, whether or not the
transactions contemplated in this
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Agreement are consummated, including without limitation reasonable fees and
disbursements of counsel.]
SECTION 5.
Conditions of Investors' Obligations.
The obligations of the Investors hereunder are subject to the
satisfaction or waiver, on or prior to the date of the Closing (the "Closing
Date"), of the following conditions:
(a) The Registration Statement, including any Rule 462(b) Registration
Statement, has become effective and at the Closing Date no stop order suspending
the effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or threatened by the Commission. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) under the 1933 Act within the
prescribed time period and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Investors of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
under the 0000 Xxx.
(b) The representations and warranties made by the Company shall be true
and correct in all material respects and the Company shall have performed in all
material respects all obligations required to be performed by it prior to the
Closing.
(c) On the Closing Date the Investors shall have received:
(i) The favorable opinion, dated as of the Closing Date, of Xxxx
Xxxx Xxxx & Freidenrich LLP, in form and substance satisfactory to the
Investors.
(ii) A certificate of the Chairman, the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Date, to the effect that (i) there has
been no Material Adverse Effect since the execution of this Agreement, (ii) the
representations and warranties in Section 2 hereof are true and correct in all
material respects with the same force and effect as though expressly made at and
as of Closing Date, (iii) the Company has complied with all agreements and
satisfied all conditions required on its part to be performed or satisfied at or
prior to Closing Date pursuant to this Agreement.
(iii) From Xxxxxx Xxxxxxxx LLP, a letter dated such date, in
form and substance satisfactory to the Investors, to the effect that (i) they
are independent certified public accountants with respect to the Company and its
subsidiaries within the meaning of the 1933 Act; (ii) it is their opinion that
the consolidated financial statements and supporting schedules included in the
Registration Statement and covered by their opinions therein comply as to form
in all material respects with the applicable accounting requirements of the 1933
Act; (iii) based upon limited procedures set forth in detail in such letter,
nothing has come to their attention which causes them to believe that [(A) the
interim unaudited financial statements of the Company and its subsidiaries
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act or are not
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presented in conformity with GAAP applied on a basis substantially consistent
with that of the audited consolidated financial statements included in the
Registration Statement (except as may otherwise be indicated therein), (B) the
unaudited amounts of revenue, earnings and earnings per common and equivalent
share set forth under "Selected Consolidated Financial Data" in the Prospectus
were not determined on a basis consistent with that of the audited consolidated
financial statements included in the Registration Statement, or (C) at a
specified date not more than three days prior to the Closing Date, there has
been any change in the capital stock of the Company or any increase in the
consolidated long-term debt of the Company and its subsidiary or any decrease in
consolidated net current assets or net assets as compared with the amounts shown
in the balance sheet incorporated by reference in the Registration Statement or,
during the period from January 3, 1999 to a specified date not more than three
days prior to the Closing Date, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated revenues, net income
or net income per share of the Company and its subsidiaries, except in all
instances for changes, increases or decreases which the Registration Statement
and the Prospectus disclose have occurred or may occur and except as otherwise
set forth in such letter;] and (iv) in addition to the examination referred to
in their opinions and the limited procedures referred to in clause (iii) above,
they have carried out certain specified procedures, not constituting an audit,
with respect to certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are specified by
the Investors, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and other
records of the Company and its Subsidiaries identified in such letter.
(d) At the Closing Date:
(i) No preliminary or permanent injunction or other order by any
court or other judicial or administrative body of competent jurisdiction which
prohibits or prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
(ii) [An amendment to the Credit Agreement shall have been
executed and delivered by all parties thereto and the Investors and the Company
shall be reasonably satisfied that none of the transactions contemplated hereby,
including, without limitation, the issuance of the Recapitalization Shares, will
constitute a Default or an Event of Default under the Credit Agreement as so
amended.
(iii) The Company shall have (i) obtained all consents and
approvals from and shall have made all filings and registrations with, any
person, including but not limited to any governmental entity, necessary to be
obtained or made in order to consummate the transactions contemplated by this
Agreement and (ii) satisfied or obtained a valid waiver of any conditions to the
effectiveness of any such consents or approvals. All such consents or approvals
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any governmental or regulatory authority necessary
for the consummation of the transactions contemplated by this Agreement,
including the HSR Act, shall have occurred.
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(iv) The Company shall have issued certificates evidencing the
Rights Shares and the Additional Shares and executed and delivered to each
Rights Investor a receipt of payment for the amount of Rights Shares subscribed
for by such Rights Investor.
(v) The Company shall have executed and delivered or caused to
be delivered the Registration Rights Agreement substantially in the form of
Annex D hereto.
(e) At the Closing Date, the Recapitalization Shares shall have been
approved for listing on the Nasdaq Stock Market, subject only to official notice
of insurance.
SECTION 6.
Indemnification.
(a) The Company agrees to indemnify and hold harmless Oaktree,
each Investor and each person, if any, who controls Oaktree or any Investor
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever, promptly after submission for payment, arising out of or
resulting from the transactions contemplated hereunder, including, but not
limited to, (A) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment thereto),
including the Rule 430A Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statement therein, in the light of the
circumstances under which they were made, not misleading; (B) any breach or
default by the Company of any of the representations or warranties under this
Agreement or any other document contemplated hereby, (C) any breach by the
Company of any of the covenants or agreements (other than breaches of covenants
to be performed by the Company after the Closing) of the Company under this
Agreement or any other document contemplated hereby or (D) any litigation or
proceedings brought by any shareholder of the Company (whether such action is
brought in such shareholder's name or derivatively on behalf of the Company) in
respect of the transactions contemplated by this Agreement or the Registration
Statement or any other document contemplated hereby (collectively, the
"Indemnifiable Investor Claims").
(ii) against any and all loss, liability, claim, damage or
expense whatsoever, promptly after submission for payment, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any Indemnifiable Investor Claim; provided that
(subject to Section 6(d) below) any such settlement is effected with the written
consent of the Company (which shall not be unreasonably withheld); and
(iii) against any and all expense whatsoever, promptly after
submission for payment (including, subject to Section 6(c) hereof, the
reasonable fees and disbursements of counsel for the indemnified party),
reasonably incurred in investigating, preparing or defending
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against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
Indemnifiable Investor Claim, to the extent that any such expense is not paid
under (i) or (ii) above.
(b) Each [Rights] Investor severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all, liability, claim, damage or expense described in the indemnity
contained in subsection (a)(i)(A) of this Section, promptly after submission for
payment, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
except to the extent the indemnifying party is materially prejudiced thereby,
and the indemnifying party may participate at its own expense in the defense of
any such action. If the indemnifying party so elects within a reasonable time
after receipt of such notice, it may assume the defense of such action, with
counsel chosen by it and approved by the indemnified parties in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which are different
from, conflicting with or in addition to those available to such indemnifying
party. Absent any difference or conflict referred to in the preceding sentence,
if an indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel retained for local procedural
and practice matters) separate from their own counsel for any indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification could be sought under this
Section 6 (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party, (iii) does not impugn the reputation of any
indemnified party and (iv) does not restrict any indemnified party from engaging
in any activity.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel, such
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indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) Expenses incurred by an indemnified party in defense or settlement
of any claim that shall be subject to a right of indemnification hereunder shall
be advanced by the Company promptly upon submission for payment, provided that
the Company shall have received an undertaking by or on behalf of such
indemnified party to repay such amount to the extent that it shall be determined
ultimately that the indemnified party is not entitled to be indemnified
hereunder.
SECTION 7.
Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto and identified as such, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any Investor
or controlling person, or by or on behalf of the Company, and shall survive
delivery of the Recapitalization Shares to the Investors.
SECTION 8.
Termination of Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
Date:
(i) by written agreement of the Company and the Investors;
(ii) by either the Company or any Investor, by giving written
notice of such termination to other parties, if Closing shall not have occurred
on or prior to ___________, 1999 (unless the failure to consummate the Closing
by such date shall be due to the failure of the party seeking to terminate this
Agreement to have fulfilled any of its obligations under this Agreement);
(iii) by any Investor, by giving written notice to the Company,
if since the date of this Agreement or since the respective dates as of which
information is given in the Prospectus, any event has occurred or failed to
occur which would have a Material Adverse Effect, whether or not arising in the
ordinary course of business, or if there has been a breach by the Company of any
representation, warranty, covenant or agreement that would give rise to the
failure of the conditions to the obligations of the Investors set forth in
Section 5(b); or
(iv) by either the Company or any Investor in the event that any
governmental authority shall have issued a final, non-appealable order, decree
or ruling or taken
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any other final, non-appealable action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable.
(b) If this Agreement is terminated pursuant to this Section 8 such
termination shall be without liability of any party to any other party except as
provided in Section 4(j) and Section 8(c) hereof, except that nothing herein
will relieve any party from liability for breach of this Agreement prior to such
termination.
(c) If this Agreement is terminated by either party prior to the
effective date of the Registration Statement, then, [provided that the Investors
shall not be in breach of their obligations as set forth herein,] the Investors
shall be entitled to reimbursement of their expenses as set forth in Section
4(j)
SECTION 9.
Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
express courier service (charges prepaid), five days after being mailed to the
recipient (postage prepaid) or upon confirmation if transmitted by any standard
form of telecommunication. Notices shall be directed as follows:
To Oaktree Capital Management, LLC:
Oaktree Capital Management, LLC
000 Xxxxx Xxxxx Xxxxxx,
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (213) 830-_____
Attn: Xxxxxxx Xxxxx, Esq.
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
000 Xxxxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
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To the Company:
Aureal Semiconductor, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (510) -
Attn: .
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (650) -
Attn: Xxxxx X. Xxxxxxxx, Esq.
SECTION 10.
Parties.
This Agreement shall each inure to the benefit of and be binding upon
the Investors and the Company and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than Oaktree, the Investors and the Company
and their respective successors and the controlling persons and officers and
directors and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Investors and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation.
SECTION 11.
Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California applicable to agreements made and to be
performed in said state.
SECTION 12.
Miscellaneous.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and each of the Investors, or in the case of a waiver,
by the party against whom the waiver is to be effective. No failure or delay by
any party in exercising any right, power or
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privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. In the event that any one or
more of the provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
(b) No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
parties hereto except that the Investors may without such consent assign their
rights hereunder to one or more of their respective affiliates.
(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same agreement.
(d) The heading references herein are for convenience purposes only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(e) Neither Oaktree nor any officer, director, member, employee,
shareholder, investment manager, director, representative, fiduciary or
controlling person of Oaktree or of any Investor shall have any personal
obligations or liability to the Company under or in connection with this
Agreement. With respect to obligations of any Investor arising hereunder, the
Company shall look for payment or satisfaction solely to the assets and property
of such Investor and not to Oaktree, any other affiliate of such Investor or
Oaktree, or any officer, director, member, employee, shareholder, investment
manager, director, representative, fiduciary or controlling person of or
investor in Oaktree or such Investor.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
AUREAL SEMICONDUCTOR, INC.
By:
---------------------------------
Title:
OAKTREE CAPITAL MANAGEMENT, LLC,
solely on behalf of the entities on
Annex A hereto and not in its
individual capacity
By:
---------------------------------
Authorized Signatory
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Annex A
INVESTORS
TCW Special Credits Fund IIIb
TCW Special Credits Trust
TCW Special Credits Trust IIIb
Weyerhauser Company Master Retirement Trust
OCM Opportunities Fund II, L.P.
Columbia/HCA Master Retirement Trust
21
Annex B
RIGHTS INVESTORS
Percentage
of
Rights Shares
OCM Opportunities Fund II, LP %
Columbia/HCA Master Retirement Trust %
22
Annex C
[Credit Agreement Amendment Term Sheet]
[TO COME]
23
Annex D
REGISTRATION RIGHTS AGREEMENT
[TO COME]
