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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 2, 1998
AUREAL SEMICONDUCTOR INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-20684 94-3117385
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
4245 TECHNOLOGY DRIVE
FREMONT, CA 94538
(510) 252-4245
(Address and phone number
of Registrant's principal executive offices)
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ITEM 5. OTHER EVENTS
On June 5, 1998, Aureal Semiconductor Inc. (the "Company") completed
three financing transactions, the combined effect of which provided the Company
with increased working capital and equity. The three transactions, which closed
simultaneously, are summarized below:
o The Company entered into a private placement transaction for the sale of $5
million of the Company's three-year 8% Series C Preferred Stock, par value
$0.001 per share (the "Series C Preferred"). The purchaser of the Series C
Preferred is an entity controlled by DDJ Capital Management, LLC ("DDJ"), the
holder of approximately 16% of the Company's common stock ("Common Stock") as
of the transaction date.
The Series C Preferred is convertible at the lesser of the fixed conversion
price ("Fixed Conversion Price") of $2.50 face value of the Series C
Preferred per share of the Company's Common Stock, or at varying discounts
from the then-current market price of the Common Stock if the Common Stock is
trading at prices below $2.50 per share over certain periods of time
("Variable Conversion Price"). Conversion of the Series C Preferred can
commence four months after the last closing (no later than July 10, 1998) of
the sale of Series C Preferred. . The holders of the Series C Preferred may
convert, at the Variable Conversion Price, at the rate of 15% of the
originally issued Series C Preferred per month. All of the Series C Preferred
may be converted into Common Stock at the Variable Conversion Price as of
June 1999. No such limitations apply to conversions of the Series C Preferred
at the Fixed Conversion Price.
Accretion at the 8% rate on the outstanding Series C Preferred is terminated
if at any time the Common Stock trades at a price in excess of 150% of the
Fixed Conversion Price for twenty consecutive trading days. At such time as
accretion is terminated, if ever, all restrictions related to the conversion
of the Series C Preferred are eliminated. If not converted earlier, all
outstanding Series C Preferred will convert into Common Stock three years
from issue date.
$3.66 million of the net proceeds from the sale of the Series C Preferred
were used to pay down the outstanding balance under the Company's existing
line of credit. The remaining net proceeds will be used for working capital
purposes.
o After the $3.66 million debt reduction noted above, the remaining balance
of $31.5 million of the Company's pre-existing line of credit was cancelled
and exchanged for the issuance of $39.375 million of the Company's 8% Series
B Preferred Stock, par value $0.001 (the "Series B Preferred"). The line of
credit was held by, and the new Series B Preferred was issued to, entities
controlled by TCW Special Credits and DDJ, holders of approximately 43% and
16% of the Common Stock of the Company, respectively, as of the date of the
transaction.
The terms of the Series B Preferred include the holders' right to convert
such shares into Common Stock of the Company, at the rate of $2.50 of Series
B Preferred per share of Common Stock, at any time over the five-year term of
the Series B Preferred. The 8% dividend may be paid in cash or in the form of
additional shares of Series B Preferred, at the Company's option. Holders of
the Series B Preferred will be entitled to vote the equivalent number of
shares of Common Stock as would be held upon conversion. The shares may be
redeemed, for cash, at face value (plus accrued dividends) at any time, at
the option of the Company.
The sale of the Series B Preferred and the Series C Preferred was not
registered under the Securities Act of 1933, as amended (the "1933 Act") nor
will the Common Stock issuable upon conversion of such preferred stock be
registered under the 1933 Act, in reliance upon the exemptions provided by
Section 4(2) of the 1933 Act and Regulation D promulgated thereunder as
transactions by an issuer, neither of which involved a public offering.
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o In addition to the foregoing transactions, the Company also entered into a
new $40 million line of credit agreement (the "Agreement") with the
Technology Finance Division of Transamerica Business Credit Corporation and
Goldman Sachs Credit Partners LP (collectively, the "Lenders"). The Agreement
has a two year term and provides for the Company to borrow up to $32.5
million ("Tranch A") based upon specific accounts receivable balances held by
the Company, and up to $7.5 million ("Tranch B") without specific asset-based
collateral. Interest will accrue on Tranch A borrowings at the Reference Rate
(usually the Prime Borrowing Rate) plus 3%. Interest will accrue on Tranch B
borrowings at the Reference Rate plus 5%. In addition, the Company paid an
origination fee of 1.5% of the face of the line of credit, and agreed to pay
an additional 0.5% supplemental origination fee on the one-year anniversary
of the Agreement.
Under the Agreement, the Company is subject to certain financial covenants
(including minimum revenue, minimum EBITDA, and minimum tangible net worth
levels as set forth in the Agreement) over the term of the Agreement.
In connection with the Agreement, the Company issued to the Lenders warrants
to purchase 1,350,000 shares of the Company's Common Stock at the exercise
price of $2.156 per share. The warrants are exercisable at any time during
their five-year term.
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ITEM 7. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
4.7(1) Aureal Semiconductor Inc. Regulation D Subscription Agreement
for Series C Preferred Stock
4.8(1) Certificate of Designation of Series C Preferred Stock of
Aureal Semiconductor Inc.
4.9(1) Registration Rights Agreement (Common stock underlying Series
C Preferred Stock)
4.10(1) Loan and Security Agreement
4.11(1) Form of Warrant
4.12(1) 8% Series B Convertible Preferred Stock Purchase Agreement
4.13(1) Certificate of Designation of 8% Series B Convertible
Preferred Stock for Aureal Semiconductor Inc.
4.14(1) Amendment Number 4 to Registration Rights Agreement
</TABLE>
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(1) Incorporated by reference to the exhibits to Form 8-K filed on June 12,
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 2, 1998
AUREAL SEMICONDUCTOR INC.
/s/ David J. Domeier
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David J. Domeier
Vice President, Finance and
Chief Financial Officer
