Exhibit 10
AUREAL SEMICONDUCTOR INC.
8% SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS 8% SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT is made
as of June ___, 1998, by and among AUREAL SEMICONDUCTOR INC., a Delaware
corporation (the "Company"), and the purchasers set forth on the Schedule of
Purchasers attached hereto as EXHIBIT A (the "Purchasers").
WHEREAS, the Purchasers, as either an original lender or assignee of an
original lender, and the Company are parties to the Second Amended and
Restated Loan Agreement dated August 7, 1997, as amended by the First
Amendment to Second Amended and Restated Loan Agreement dated as of May 6,
1998 (the "Loan Agreement"), pursuant to which, among other things, the
Purchasers increased the amount of the revolving credit facility to up to
$31.5 million, have fully funded the Tranche A and B commitment of the
revolving credit facility (such outstanding Tranche A and B, hereinafter the
"Outstanding Debt");
WHEREAS, the Purchasers are the record and beneficial owners of the
Outstanding Debt under the Loan Agreement in the amounts set forth on EXHIBIT
A; and
WHEREAS, the Purchasers seek to convert the Outstanding Debt into equity
of the Company upon the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereby agree as follows:
1. SALE OF STOCK. Subject to the terms and conditions hereof, the
Company will issue and sell to each Purchaser, and each Purchaser will
purchase from the Company, at a Closing (as defined below), the number of
shares of 8% Series B Convertible Preferred Stock of the Company (the "Series
B Stock") set forth opposite each Purchaser's name on EXHIBIT A. In
consideration for each share of Series B Stock, each Purchaser shall agree to
cancel eight hundred dollars ($800.00) of the Outstanding Debt owed by the
Company to such Purchaser. In connection with the foregoing transactions, the
Company acknowledges that the participation interests in the Tranche B
Commitment (as such term is defined in the Loan Agreement) in the amount of
$4.5 million has been, immediately prior hereto, elevated to an assignment.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The closing of the purchase and sale of the
Series B Stock (the "Closing") shall be held on June __, 1998 (the "Closing
Date"), at the offices of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx
Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000.
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2.2 DELIVERY. Subject to the terms of this Agreement, at the
Closing the Company will deliver to the Purchasers the stock certificates
representing the Series B Stock to be purchased by the Purchasers from the
Company, against cancellation of the Outstanding Debt owed by the Company to
each Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in EXHIBIT B attached hereto, the Company hereby represents and warrants to
the Purchasers as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND
BYLAWS. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted and
as proposed to be conducted. The Company is presently qualified, licensed or
domesticated as a foreign corporation or partnership in all jurisdictions in
which the failure to be so qualified, licensed or domesticated would result
in material adverse consequences to the Company or its business.
3.2 CORPORATE POWER. The Company has all requisite legal and
corporate power to enter into this Agreement and all other agreements
contemplated hereby, to sell the Series B Stock hereunder, and to carry out
and perform its obligations under the terms of this Agreement and all other
agreements contemplated hereby. This Agreement and all other agreements
contemplated hereby are valid and binding obligations of the Company, except
as the same may be limited by bankruptcy, insolvency, fraudulent conveyance,
moratorium, usury, reorganization, and other laws of general application
affecting the enforcement of creditors' rights.
3.3 CAPITALIZATION. The authorized capital stock of the Company
is 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. As of March 27, 1998, there were issued and outstanding 42,082,938
shares of the Company's Common Stock and 500 shares of the Company's Series A
Preferred Stock ("Series A Stock"). All such issued and outstanding shares
have been duly authorized and validly issued, are fully paid and
non-assessable and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. The Company maintains
stock option plans and has issued stock options and warrants as noted below:
(a) Shares of Common Stock reserved for issuance pursuant to
exercise of current or future outstanding options under the Company's 1995
Stock Option Plan and 1994 Stock Option Plan (collectively, the "Plans")
issued to employees or consultants to the Company: 9,594,975;
(b) Shares of Common Stock reserved for issuance pursuant to
exercise of current or future outstanding options under the Crystal River
Engineering, Inc. Stock Option Plan: 1,999,269;
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(c) Shares of Common Stock reserved for issuance pursuant to
exercise of current or future outstanding options under the Company's Outside
Director Stock Option Plan: 200,000;
(d) Shares of Common Stock reserved for issuance pursuant to
exercise of warrants to be issued to certain lenders in connection with the
expansion and restructuring of the Company's debt and extension thereof
through March 31, 2000: 3,150,000;
(e) Shares of Common Stock reserved for issuance pursuant to
exercise of an outstanding warrant to Xxxxxxxxx & Xxxxx: 50,000;
(f) Shares of Common Stock reserved for issuance pursuant to
exercise of outstanding warrants issued by the Company to purchasers of units
on August 6, 1997: 955,000; and
(g) Shares of Common Stock reserved for issuance pursuant to
exercise of outstanding warrants to Xxxxxx Investments, LLC: 140,000.
Other than the above noted reserved shares and the Common Stock to be
reserved for issuance upon conversion of the Series A Stock and the Series B
Stock, there are no outstanding rights, options, warrants, conversion rights
or agreements for the purchase or acquisition from the Company of any shares
of its capital stock. The Company is not a party or subject to any agreement
or understanding between any persons or entities which affects or relates to
the voting or giving of written consents with respect to any securities or by
any director of the Company.
3.4 AUTHORIZATION.
(a) All corporate, federal and state action on the part of
the Company, its officers, directors and stockholders necessary for the sale
and issuance of the Series B Stock, and the Common Stock issuable upon
conversion of the Series B Stock pursuant hereto and the performance of the
Company's obligations hereunder or contemplated hereby has been taken or will
be taken prior to the Closing.
(b) The Series B Stock, when issued in compliance with the
provisions of this Agreement, and the Common Stock issuable upon conversion
of the Series B Stock, as provided for in the Certificate of Designation (the
"Certificate of Designation"), a form of which is attached hereto as EXHIBIT
C, will be validly issued, fully paid and nonassessable, and will be free of
any liens or encumbrances; provided, however, that the Series B Stock and the
Common Stock issuable upon conversion thereof may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein,
and as may be required by future changes in such laws.
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(c) No person has any right of first refusal or any
preemptive rights in connection with the issuance of the Series B Stock or
the Common Stock issuable upon conversion of the Series B Stock.
3.5 PATENTS, TRADEMARKS, ETC. Except as set forth in EXHIBIT B,
the Company owns and possesses or is licensed under all patents, patent
applications, licenses, trademarks, trade names, brand names, inventions,
processes, formulae and copyrights necessary for the operation of the
business of the Company as now conducted and as proposed to be conducted with
no known infringement of or conflict with the rights of others. Except as
contemplated in this Agreement, there are no outstanding options, licenses,
or agreements of any kind relating to the foregoing, nor is the Company bound
by or a party to any other options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. Except as disclosed in the Company's Annual Report
on Form 10-K for the period ended December 28, 1997 (the "10-K"), the Company
has not received any communications alleging that it has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware
that any of its employees are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to
promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted or that would prevent any such
employee from assigning inventions to the Company. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business as
proposed, will, to the best of the Company's knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe that it is or will
be necessary for the Company to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Certificate of Incorporation
or Bylaws, nor is the Company in violation in any material respect of any
mortgage, indenture, contract, agreement, instrument, judgment or decree, and
to the best of the Company's knowledge, the Company is not in violation of
any order, statute, rule or regulation applicable to the Company, including
by not limited to the Securities Exchange Act of 1934 and the reporting
obligations of the issuer with respect to Rule 144 under the Securities Act.
The execution, delivery and performance of and compliance with this Agreement
and the other agreements contemplated hereby, and the issuance and sale of
the Series B Stock (and the issuance of the Common Stock issuable upon
conversion of the Series B Stock) pursuant hereto, will not result in (a) any
such violation, or (b) be in conflict with or constitute a default under any
such term or (c) result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term. In addition, the execution, delivery and
performance of and compliance with this Agreement and the other agreements
contemplated hereby, and the issuance and sale of the Series B Stock pursuant
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hereto, will not result in a violation of any law, statute or regulation
applicable to the Company, including Section 203 of the Delaware General
Corporation Law.
3.7 EMPLOYEES. Each officer and key employee of the Company has
executed an Employee Proprietary and Confidential Information Agreement. The
Company, after reasonable investigation, is not aware that any of its
employees are in violation thereof, and the Company will use its best efforts
to prevent any such violation.
3.8 LITIGATION, ETC. Except as set forth on EXHIBIT B, there are
no actions, proceedings or investigations pending against the Company or its
officers, directors, or stockholders, or to the best of the Company's
knowledge, against employees or consultants of the Company (or, to the best
of the Company's knowledge, any basis therefor or threat thereof): (1) which
might result in (a) any material adverse change in the business, prospects,
conditions, affairs or operations of the Company, or in any of their
properties or assets, or (b) any material impairment of the right or ability
of the Company to carry on its business as now conducted or as proposed to be
conducted, or (c) any material liability on the part of the Company; or (2)
which questions the validity of this Agreement or any action taken or to be
taken in connection herewith. The Company does not currently plan to
initiate any litigation.
3.9 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority or any other person on the part of the Company is required in
connection with: (a) the valid execution and delivery of this Agreement; or
(b) the offer, sale or issuance of the Series B Stock (or the Common Stock
issuable upon conversion of the Series B Stock); or (c) the obtaining of the
consents, permits and waivers specified in subsection 5.1(c) hereof; or (d)
the consummation of any other transaction contemplated hereby; except, if
required, filings or qualifications under the Securities Act of 1933, as
amended (the "Securities Act") and California Corporate Securities Law of
1968, as amended (the "Law"), which filings or qualifications, if required,
will have been timely filed or obtained.
3.10 OFFERING. In reliance on the representations and warranties
of the Purchasers in Section 4 hereof, the offer, sale and issuance of the
Series B Stock in conformity with the terms of this Agreement will not result
in a violation of the requirements of Section 5 of the Securities Act or the
qualification requirements of the Law.
3.11 TAXES. The Company has timely filed all tax returns that are
required to have been filed with appropriate federal, state, county and local
governmental agencies or instrumentalities. The Company has paid or
established reserves for all income, franchise and other taxes due as
reflected on said returns. There is no pending dispute with any taxing
authority relating to any of such returns and the Company has no knowledge of
any proposed liability for any tax to be imposed upon the properties or
assets of the Company for which there is not an adequate reserve reflected in
the Company's financial statements contained in the 10-K.
3.12 REGISTRATION RIGHTS. Except pursuant to the Registration
Rights Agreement, dated as of December 30, 1994, as amended (the "Rights
Agreement"), by and
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among the Company, TCW Special Credits, a California general partnership as
agent and nominee for the entities set forth on Schedule I to the Rights
Agreement, Appaloosa Management L.P., as agent for the accounts listed on
Schedule I to the Rights Agreement, the Copernicus Fund, L.P., the Galileo
Fund, L.P., and certain purchasers of the Company's Common Stock, and the
Registration Rights Agreement dated March 6, 1998, among the Company, Xxxxxx
Investments, LLC and subscribers of the Company's Series A Stock, the Company
is not obligated to register any of its presently outstanding securities
which may hereafter be issued.
3.13 DISCLOSURE. Neither this Agreement and the exhibits hereto,
nor any of the other statements or certificates furnished or to be furnished
to the Purchasers pursuant hereto or in connection with the transactions
contemplated hereby, including the 10-K, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements contained herein and therein not misleading in light of the
circumstances under which such statements were made.
3.14 COMPLIANCE WITH PUBLIC REPORTING REQUIREMENTS. As of the
Closing Date, the Company is in compliance in all material respects with the
applicable requirements of the Exchange Act of 1934, as amended.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS AND
RESTRICTIONS ON TRANSFER IMPOSED BY THE SECURITIES ACT OF 1933.
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE PURCHASERS.
Each Purchaser represents, warrants and covenants to the Company as follows:
(a) The Series B Stock and the Common Stock issuable upon
conversion of the Series B Stock (collectively, for purposes of this Section
4, the "Securities") to be received by the Purchaser will be acquired for
investment for the Purchaser's own account, for investment and not with a
view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act and the Law. The
Purchaser has the full right, power and authority to enter into and perform
this Agreement and all other agreements contemplated hereby, and this
Agreement and all other agreements contemplated hereby constitute valid and
binding obligations of the Purchaser. The Purchaser acknowledges and
understands that the Securities must be held indefinitely unless the
Securities are subsequently registered under the Securities Act and qualified
under the Law or an exemption from such registration and such qualification
is available.
(b) The Purchaser will not sell, negotiate, pledge or
otherwise dispose of any of the Securities (other than in conjunction with an
effective registration statement for the Securities under the Securities Act
or an exemption from registration under applicable federal securities laws).
(c) The Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the Purchaser's prospective investment in the Securities. The
Purchaser has the ability to bear the economic
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risks of the Purchaser's prospective investment. The Purchaser has been
furnished with and has had access to such information as the Purchaser has
considered necessary to make a determination as to the purchase of the
Securities together with such additional information as is necessary to
verify the accuracy of the information supplied. The Purchaser is fully
aware of (i) the highly speculative nature of the investment in the
Securities; (ii) the financial hazards involved; (iii) the lack of liquidity
of the Securities, and the restrictions on the transferability of the
Securities; and (iv) the tax consequences of investment in the Securities.
The Purchaser has had all questions which have been asked by the Purchaser
satisfactorily answered by the Company. The Purchaser has not been offered
the Series B Stock by any form of advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any such media.
4.2 LEGENDS. Each certificate or other instruments representing
any of the Securities may be endorsed with the following legends:
(a) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.
(b) Any other legends required by the Law.
The Company need not register a transfer of legended Securities, and may also
instruct its transfer agent not to register the transfer of the Securities
unless the conditions specified in each of the foregoing legends are
satisfied.
4.3 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. Any legend
endorsed on a certificate or other instrument pursuant to subsection 4.2(a)
and 4.2(b) and the stop transfer instructions with respect to such legended
securities shall be removed, and the Company shall issue a certificate
without such legend to the holder of such securities if such securities are
registered under the Securities Act and a prospectus meeting the requirements
of Section 10 of the Securities Act is available or if such holder satisfies
the requirements of Rule 144(k) and, where reasonably deemed necessary by the
Company, the holder provides the Company with an opinion of counsel for such
holder of the securities, reasonably satisfactory to the Company, to the
effect that (i) such holder meets the requirements of Rule 144(k) or (ii) a
public sale, transfer or assignment of such securities may be made without
registration.
4.4 RULE 144. The Purchaser is aware of the adoption of Rule 144
by the Securities and Exchange Commission (the "SEC") promulgated under the
Securities Act,
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which permits limited public resales of securities acquired in a nonpublic
offering, subject to the satisfaction of certain conditions. The Purchaser
understands that under Rule 144, the conditions include, among other things:
the availability, under certain conditions, of certain current public
information about the issuer and the resale occurring not less than one year
(with certain restrictions) after the party has purchased and paid for the
securities to be sold. The Company covenants that (i) the Company will use
its best efforts to comply with the current public information requirements
of Rule 144(c)(1) under the Securities Act and (ii) at all such times as Rule
144 is available for use by the Purchaser, the Company will furnish the
Purchaser upon request with all information within the possession of the
Company required for the preparation and filing of Form 144.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO THE PURCHASERS' OBLIGATIONS. The obligation of
the Purchasers to purchase the Series B Stock at the Closing is subject to
the fulfillment to their satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived in accordance with the
provisions of subsection 6.1 hereof:
(a) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Company's
business and assets shall not have been adversely affected in any material
way prior to the Closing Date. The Company shall have performed in all
material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing Date.
(b) OPINION OF COMPANY'S COUNSEL. Xxxx Xxxx Xxxx &
Freidenrich LLP, counsel to the Company, shall have delivered an opinion
addressed to the Purchasers, dated the Closing Date, substantially in the
form as that attached hereto as EXHIBIT D.
(c) CONSENTS AND WAIVERS. The Company shall have obtained in
a timely fashion any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this
Agreement.
(d) LEGAL INVESTMENT. At the time of the Closing, the
purchase of the Series B Stock hereunder shall be legally permitted by all
laws and regulations to which the Purchasers and the Company are subject.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered
a Certificate, executed by the President and the Chief Financial Officer of
the Company, dated the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (c) and (d) of this Section 5.1.
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(f) EXECUTION OF AMENDMENT TO THE RIGHTS AGREEMENT. The
Company and the Purchasers shall have executed Amendment No. 4 to the
Registration Rights Agreement dated December 30, 1994, in the form attached
hereto as EXHIBIT E.
(g) FAIRNESS OPINION. Xxxxxxxx Xxxxx Xxxxxx & Xxxxx ("HLHZ")
shall have delivered an opinion to the Company regarding the fairness of the
sale of the Series B Stock by the Company to the Purchasers, in a form
reasonably satisfactory to the Purchasers and the Company.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to sell and issue the Series B Stock at the Closing is subject to
the fulfillment to the Company's satisfaction on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company in
accordance with the provisions of subsection 6.1 hereof:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The
representations and warranties made by the Purchasers in Section 4 hereof
shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and
as of said date.
(b) CONSENTS AND WAIVERS. Each of the Purchasers shall have
obtained in a timely fashion any and all consents, permits and waivers
necessary or appropriate for consummation of the transactions contemplated by
this Agreement.
(c) OUTSTANDING DEBT. The Company shall have received
documentation regarding the cancellation the Outstanding Debt from the
Purchasers prior to the Closing.
(d) RELEASE OF SECURITY INTERESTS. The Purchasers shall have
filed the appropriate UCC forms to release all of the Purchasers' liens on
the Company's assets.
(e) FAIRNESS OPINION. HLHZ shall have delivered an opinion
to the Company regarding the fairness of the sale of the Series B Stock by
the Company to the Purchasers, in a form reasonably satisfactory to the
Purchasers and the Company.
(f) SATISFACTION OF CONDITIONS. The conditions set forth in
subsections (c) and (d) of Section 5.1 shall have been fulfilled.
6. MISCELLANEOUS.
6.1 WAIVERS AND AMENDMENTS. This Agreement or any provision
hereof may be amended, waived, discharged or terminated only by a statement
in writing signed by the party against which enforcement of the amendment,
waiver, discharge or termination is sought.
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6.2 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California without regard to conflict of
law principles.
6.3 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive the Closing of the transactions
contemplated hereby, notwithstanding any investigation made by the
Purchasers. All statements as to factual matters contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant hereto
or in connection with the transactions contemplated hereby shall be deemed to
be representations and warranties by the Company hereunder as of the date of
such certificate or instrument.
6.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto.
6.5 ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and
supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect thereto.
6.6 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be delivered personally
or mailed by first class mail, postage prepaid, or via facsimile or
TWX/Telex, addressed (a) if to the Purchasers at the address set forth on
EXHIBIT A to this Agreement, or at such other address as the Purchasers shall
have furnished to the Company in writing, or (b) if to the Company, at its
address set forth at the beginning of this Agreement, or at such other
address as the Company shall have furnished to the Purchasers in writing,
with a copy of any said notice to be sent to Xxxx Xxxx Xxxx & Freidenrich
LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxx
X. Xxxxxxxx, Esq. Notices that are mailed shall be deemed received ten (10)
days after deposit in the mail. In the event that the notice is sent by
facsimile or TWX/Telex, notice shall be deemed to have been received when
sent and confirmed as to receipt.
6.7 SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
6.8 EXPENSES. The Company and the Purchasers shall each bear
their own expenses and legal fees in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, the Company
shall pay the reasonable legal fees and related costs of the Purchasers, up
to an aggregate of $10,000.
6.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
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6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.11 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to the Company or to the Purchasers shall
impair any such right, power or remedy of the Company or the Purchasers, nor
shall it be construed to be a waiver of any breach or default under this
Agreement, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any delay or omission to exercise any
right, power or remedy or any waiver of any single breach or default be
deemed a waiver of any other right, power or remedy or breach or default
theretofore or thereafter occurring. All remedies, either under this
Agreement, or by law otherwise afforded to the Company or the Purchasers,
shall be cumulative and not alternative.
6.12 ARBITRATION. Any controversy or claim arising out of or
related to this Agreement or the breach thereof, shall be settled by binding
arbitration in San Francisco, California in accordance with the Expedited
Procedures (Rules 53-57) of the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). A proceeding may be commenced upon written
demand by the Company, any original Purchaser (as set forth on EXHIBIT A
hereto) or Purchasers holding a majority of the Series B Stock. The
arbitrator shall enter a judgment by default against any party which fails or
refuses to appear in any properly noticed arbitration proceeding. The
proceeding shall be conducted by one arbitrator. The arbitrator will be
chosen by the parties from a list provided by the AAA, and if they are unable
to agree within ten (10) days, the AAA shall select the arbitrator. The
arbitrator must be an expert in securities law and financial transactions.
The nonprevailing party in any arbitration shall pay all costs and expenses
incurred by the prevailing party, including reasonable attorney fees and
expenses. Each party submits irrevocably to the jurisdiction of any state
court or United States District Court sitting in San Francisco, California
for purposes of enforcement of any discovery order, judgment or award in
connection with such arbitration. The award of the arbitrator shall be final
and binding upon the parties and may be enforced in any court having
jurisdiction.
AUREAL SEMICONDUCTOR INC.
By ______________________________
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COUNTERPART SIGNATURE PAGE TO
8% SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF JUNE ___, 1998
"PURCHASER"
TCW Special Credits, as agent and
on behalf of the funds and accounts
set forth on Schedule I, attached
hereto
By: TCW Asset Management Company
Its: Managing General Partner
By: ____________________________
By: ____________________________
If you are signing on behalf of Name of Organization
an entity, please print the legal
name of the entity and sign to the __________________________
right, indicating your title
Name (Please Print)
______________________________
Title:________________________
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COUNTERPART SIGNATURE PAGE TO
8% SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF JUNE ___, 1998
"PURCHASER"
B III Capital Partners, L.P.
By: __________________________
Its: _________________________
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SCHEDULE I
(8% SERIES B CONVERTIBLE PREFERRED STOCK)
TCW TRANCHE A & B LENDERS NO. OF SHARES
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TCW Special Credits Trust 7,087
TCW Special Credits Fund IIIb 13,838
TCW Special Credits Trust IIIb 10,800
TCW Special Credits, as Investment Manager 2,025
of Delaware State Employees Retirement Fund
(separate account)
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EXHIBIT A
SCHEDULE OF PURCHASERS
NAME AND ADDRESS SHARES AMOUNT OF CANCELED DEBT
---------------- ------ -----------------------
TCW Special Credits Trust 7,087 $ 5,670,000
c/o Oaktree Capital Management, LLC
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
TCW Special Credits Fund IIIb 13,838 $ 11,070,000
c/o Oaktree Capital Management, LLC
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
TCW Special Credits Trust IIIb 10,800 $ 8,640,000
c/o Oaktree Capital Management, LLC
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
TCW Special Credits, as Investment
Manager of Delaware State Employees
Retirement Fund (Separate Account) 2,025 $ 1,620,000
c/o Oaktree Capital Management, LLC
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
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B III Capital Partners, L.P. 5,625 $ 4,500,000
c/o DDJ Capital Management, LLC
000 Xxxxxx Xxxxxx, Xxxxx X-0
Xxxxxxxxx, XX 00000
Attn: General Counsel
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TOTAL 39,375 $ 31,500,000
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EXHIBIT B
SCHEDULE OF EXCEPTIONS
AUREAL SEMICONDUCTOR INC.
Pursuant to Section 3 of the 8% Series B Convertible Preferred Stock Purchase
Agreement dated June ___, 1998 (the "Agreement"), by and among Aureal
Semiconductor Inc., a Delaware corporation (the "Company"), and the Purchasers
set forth on Exhibit A thereto, Company hereby delivers this Schedule of
Exceptions to the Company's representations and warranties given in the
Agreement. The section numbers in this schedule correspond to the section
numbers in the Agreement. Capitalized terms used in this schedule unless
otherwise specified have the same meanings given them in the Agreement.
Section 3.3
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The Company may increase the reserves under the Plans automatically so that
the reserves under such plans, in the aggregate, equal twenty percent
(20%) of the then fully diluted Common Stock of the Company.
The Company is currently negotiating the sale of up to $15,000,000 of Series
C Preferred Stock. In the event the Company issues shares of Series C
Preferred Stock, the Company will reserve an equal number of shares of Common
Stock for issuance upon conversion of such shares.
Section 3.5
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As described in the Company's 1996 Form 10-K, Yamaha has aggressively brought
patent infringement actions against other companies which have developed
certain replacement FM synthesis chips. There can be no assurance that
Yamaha will not pursue the Company under similar theories.
On February 27, 1998, Aureal was served with an action filed by Creative
Technology Ltd., a Singapore corporation, and E-MU Systems, Inc., a
California corporation, in federal district court in the Northern District of
California, alleging patent infringement by Aureal. The plaintiffs claim that
Aureal's Vortex 8820 PCI-based AC'97 Digital Audio Processor infringes United
States Patent No. 5,342,990 entitled "Digital Sampling Instrument Employing
Cache-Memory" which basically describes a specific implementation for a
stand-alone music synthesizer circuit. The Company has reviewed the
allegations in the omplaint and believes that the action is completely
without merit and intends to vigorously pursue defense of this action.
Shiva Holdings Limited ("Shiva") filed a cross-complaint against the Company
in December 1997 alleging breach of contract, breach of implied covenant of
good faith and fair dealing, fraud and negligent misrepresentation in
connection with the Agreement for Purchase of
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Certain Assets entered into between Shiva and the Company in February 1996.
The Company had filed an action against Shiva for breach of contract and
specific performance in connection with the failure of Shiva to pay
certain amounts due under the February 1996 agreement. Shiva alleges that
the Company made certain misrepresentations in the sale of assets by the
Company to Shiva and is seeking damages in excess of $1,000,000. The
Company believes that the claims by Shiva are groundless and intends to
defend them vigorously.
On or about September 4, 1997, Xxxxxxxx X. Xxxx, Ph.D., filed a Demand for
Arbitration against the Company in the San Francisco office of the American
Arbitration Association. The demand asserts claims for declaratory relief
and breach of contract. It seeks general and compensatory damages of
$16,770, together with additional damages according to proof, and a judicial
determination that Xx. Xxxx has performed his contractual duties, has not
misappropriated any Aureal trade secrets and that certain technology that Xx.
Xxxx has developed does not belong to Aureal. The Company believes that the
claims by Xx. Xxxx are groundless and intends to defend them vigorously.
The Company has licensed its Media Vision retail trade names to a third
party.
Section 3.8
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See Section 3.5.
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EXHIBIT C
CERTIFICATE OF DESIGNATION
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EXHIBIT D
FORM OF LEGAL OPINION
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EXHIBIT E
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AMENDMENT NO. 4 TO THE REGISTRATION RIGHTS AGREEMENT
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