Xxxxxxx 0
XXXXXXX XXXXXXXX AGREEMENT
dated as of May 26, 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
STANDBY PURCHASE AGREEMENT
This Standby Purchase Agreement, dated as of May 26, 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
under the heading "Oaktree Investors" (collectively with Oaktree, the
"OAKTREE INVESTORS"), Trust Company of the West ("TCW"), on behalf of each of
the entities set forth on Annex A hereto under the heading "TCW Investors"
(collectively with TCW, the "TCW INVESTORS" and, together with the Oaktree
Investors, collectively, the "INVESTORS") and Aureal Semiconductor, Inc., a
Delaware corporation (the "COMPANY").
WHEREAS, as part of its restructuring, 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 (the "BASIC SUBSCRIPTION PRIVILEGE") 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 (the
"OVERSUBSCRIPTION PRIVILEGE");
WHEREAS, the Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement on Form S-3 (No.
333-75631) 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 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, which conversion
price shall be adjusted to $2.04 per share of Common Stock in accordance with
Certificate of Designation governing the Series B Stock as a result of the
Rights Offering (the "ADJUSTED CONVERSION PRICE"); and
WHEREAS, in addition to the shares of Common Stock to be issued
upon conversion of the Series B Stock at the Adjusted Conversion Price (the
"CONVERSION SHARES") the Company, as part of its restructuring, has agreed to
issue 620.92 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 26,388,922 shares of Common Stock (the
"ADDITIONAL SHARES" and, together with the Rights Shares and the Conversion
Shares, collectively, the "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 later of (i) May 21, 1999, and (ii) 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
2
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 sum of (x) the Rights Investors' aggregate Basic Subscription
Privileges PLUS (y) the aggregate amount of Rights Shares for which the
Company's stockholders other than the Rights Investors shall have exercised
their Basic Subscription Privileges and Oversubscription Privileges.
(b) The Company will issue 620.92 Additional Shares in respect of each
share of Series B Stock converted into 490.19 shares of Common Stock at the
Adjusted Conversion Price prior to the later of (i) May 21, 1999 or (ii) the
Expiration Date.
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
3
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 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 April 4, 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
4
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 the Registration Statement; and the issuance of the 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 Conversion Shares have been duly authorized and
when issued and delivered in accordance with the Certificate of Designation
governing the Series B Stock, will be validly issued, fully paid and
non-assessable.
(x) 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.
(xi) 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; the
execution, delivery and performance of this Agreement, the Rights and the
Registration Rights Agreement (as defined herein) 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.
5
(xii) 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.
(xiii) 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.
(xiv) Each of this Agreement and the Registration Rights
Agreement constitute valid and binding obligations of the Company enforceable
in accordance with their respective 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 of Disinterested Directors, has
authorized and approved this Agreement, the Registration Rights Agreement and
the transactions relating thereto.
(xv) 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.
(xvi) Except as set forth in the Registration Statement and
all other currently effective registration statements filed by the Company
under the 1933 Act, 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.
(xvii) 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.
6
(xviii) 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 April 4, 1999.
(xix) 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.
(xx) 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 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, 1994.
(xxi) 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.
(xxii) 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.
7
(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 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) As promptly as practicable, but in no event later than five
business days following the Expiration Date (the "NOTIFICATION 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.
On or prior to 10:00 a.m. on the second business day following the
Notification Date, a closing (the "CLOSING") shall be held at the offices of
Xxxx Xxxx Xxxx & Freidenrich LLP, counsel for the Company, at 000 Xxxxxxxx
Xxxxxx, Xxxx Xxxx, 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
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.
(b) 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 Conversion
Shares and the Additional Shares shall be made to the Investors at the
Closing through delivery of an instruction letter countersigned by the
transfer
8
agent of the Common Stock and in form and substance satisfactory to the
Investors (the "INSTRUCTION LETTER").
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 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
9
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 (i) use the net proceeds received by it from
the sale of the Rights Shares to repay amounts outstanding under the Credit
Agreement and (ii) not, without the prior written consent of the Oaktree
Investors, borrow any Tranche B Advances (as defined in the Credit Agreement)
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 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) 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.
(h) 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 Agreement are consummated, including
without limitation reasonable fees and disbursements of counsel.
10
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 as of the Closing Date 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.
(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) 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
11
any governmental or regulatory authority necessary for the consummation of
the transactions contemplated by this Agreement, including the HSR Act, shall
have occurred.
(iii) The Company shall have issued the Instruction Letter
and provided a copy thereof, acknowledged by the transfer agent for the
Common Stock, to the Investors.
(iv) The Company shall have executed and delivered or caused
to be delivered the Registration Rights Agreement substantially in the form
of Annex C hereto (the "REGISTRATION RIGHTS AGREEMENT").
(e) At the Closing Date, the Company shall have applied to have
the Shares approved for listing on the Nasdaq Stock Market.
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, and any officer, director, member, employee, shareholder, investment
manager, director, representative, fiduciary or controlling person of each of
the foregoing 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
12
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 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 arties 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
13
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 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 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 June 10, 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
14
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 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: (000) 000-0000
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.
15
To the Company:
Aureal Semiconductor, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attn: Xxxxx Xxxxxxx
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
SECTION 10.
PARTIES.
This Agreement shall each inure to the benefit of and be binding
upon Oaktree, TCW, the Investors and their respective officers, directors,
members, employees, shareholders, investment managers, representatives,
fiduciaries and controlling persons (the "INVESTOR PARTIES") 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 the Investor Parties and the Company, 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 Investor
Parties and the Company 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 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
16
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.
17
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:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
TRUST COMPANY OF THE WEST,
solely on behalf of the entities on
Annex A hereto and not in its individual
capacity
By:
---------------------------------
Authorized Signatory
2
Annex A
INVESTORS
TCW INVESTORS
-------------
TCW Special Credits Fund IIIb
TCW Special Credits Trust
TCW Special Credits Trust IIIb
OAKTREE INVESTORS
-----------------
Weyerhauser Company Master Retirement Trust
OCM Opportunities Fund II, L.P.
Columbia/HCA Master Retirement Trust
Annex B
RIGHTS INVESTORS
Percentage
of
Rights Shares
-------------
OCM Opportunities Fund II, LP 99%
Weyerhauser Company Master Retirement Trust 1%
Annex C
REGISTRATION RIGHTS AGREEMENT
