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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 9, 1999
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(Date of Report)
THRUSTMASTER, INC.
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(Exact Name of Registrant as Specified in Charter)
OREGON 0-25520 93-1040330
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
SUITE 400, 7175 N.W. EVERGREEN PARKWAY, HILLSBORO, OREGON 97124
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(Address of principal executive offices) (Zip Code)
(503) 615-3200
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On June 9, 1999, ThrustMaster, Inc. (the "Company") and two investors,
Strong River Investments, Inc. ("Strong River") and Bay Harbor Investments Inc.
(collectively, the "Investors"), entered into a Convertible Debenture Purchase
Agreement (the "Debenture Purchase Agreement") pursuant to which the Investors
purchased $6 million aggregate principal amount of the Company's zero coupon
Convertible Debentures due June 9, 2002 (the "Debentures").
The Debentures may be converted into shares of the Company's Common
Stock at any time prior to June 9, 2002. The number of shares into which each
Debenture is convertible is equal to the outstanding principal amount of the
Debenture divided by the conversion price. The conversion price for the first 89
days after June 9, 1999 (the "Closing Date") is $24.00. During the period
commencing on the date 90 days and ending on the date 300 days after the Closing
Date, the conversion price will be the lesser of (a) $24.00 and (b) 88.89% of
the average of the lowest 10 closing bid prices per share of the Company's
Common Stock during the 25 trading days preceding the conversion date. After the
date 300 days after the Closing Date, the conversion price will remain equal to
the conversion price in effect on the date 300 days after the Closing Date.
In January 1999, the Company and three investors, including Strong
River, entered into a Securities Purchase Agreement pursuant to which these
investors agreed to invest up to $16 million in the Company by means of up to
three tranches of investment. Each tranche of investment would be made solely at
the Company's election, subject to specified closing conditions, including the
market price of the Common Stock. The Securities Purchase Agreement provides
that the Company will issue to the investors Common Stock and warrants to
purchase Common Stock at closings thereunder. The agreement also provides an
adjustment mechanism for each tranche of investment which could result in the
issuance to the investors of additional shares of Common Stock at no additional
cost. On January 28, 1999, the investors invested $4 million in the Company
pursuant to the Securities Purchase Agreement.
On the Closing Date under the Debenture Purchase Agreement, the
Company and Strong River modified the terms of the Securities Purchase
Agreement. Strong River waived its right to receive any additional shares in
connection with the first tranche of investment pursuant to the operation of
the adjustment mechanism in the Securities Purchase Agreement, and the
Company waived its right to require Strong River to make a tranche two
investment under that agreement and issued a warrant to Strong River (the
"Warrant"). The economic effect of the Warrant and the waived right to
receive adjustment shares are substantially identical.
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The Warrant has two "vesting" dates. The first vesting date is July 2,
1999; the second vesting date is July 27, 1999. The number of shares of Common
Stock that will vest and become exercisable on each vesting date is equal to (a)
the product of (i) 62,500 multiplied by (ii) $18.00 minus the Reset Price,
divided by (b) the Reset Price. The Reset Price is equal to the average of the
lowest 10 closing bid prices per share of the Company's Common Stock during the
25 days preceding the applicable vesting date. If the Reset Price for a given
period is less than $18.00, no shares will vest and become exercisable on the
related vesting date. The exercise price under the Warrant is $0.01 per share.
The Warrant expires on October 15, 1999.
The Investors have agreed not to enter into certain short sales of the
Company's Common Stock for a period of 300 days from the Closing Date.
The initial sale of the Debentures and the Warrant was not registered
under the Securities Act of 1933, as amended. The Company will file one or more
registration statements to register for resale by the Investors all shares of
Common Stock issuable upon conversion of the Debentures and by Strong River of
all shares issuable upon exercise of the Warrant. Each registration statement is
required to remain in effect for three years.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Listed below are the exhibits filed as a part of this report.
(c) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
4.5 Convertible Debenture Purchase Agreement dated as of June 9,
1999 among ThrustMaster, Inc., Strong River Investments,
Inc. and Bay Harbor Investments Inc.
4.6 Form of Convertible Debenture.
4.7 Form of Warrant
4.8 Form of Registration Rights Agreement dated as of June 9,
1999 among ThrustMaster, Inc., Strong River Investments,
Inc. and Bay Harbor Investments Inc.
</TABLE>
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SIGNATURE
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 hereunto duly authorized.
THRUSTMASTER, INC.
Dated: June ___, 1999 By /s/ Frank G. Hausmann
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Frank G. Hausmann,
President and CEO
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________________________________________________________________________________
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
THRUSTMASTER, INC.,
STRONG RIVER INVESTMENTS, INC.,
and
BAY HARBOR INVESTMENTS, INC.
Dated as of June 9, 1999
________________________________________________________________________________
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of June 9, 1999
(this "AGREEMENT"), among ThrustMaster, Inc., an Oregon corporation (the
"Company") and Strong River Investments Inc. ("STRONG RIVER"), a corporation
organized under the laws of the British Virgin Islands, and Bay Harbor
Investments, Inc. ("BAY HARBOR"), a corporation organized under the laws of the
British Virgin Islands. Strong River and Bay Harbor are each referred to herein
as a "PURCHASER" and are collectively referred to herein as the "PURCHASERS".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell and the Purchasers desire to
purchase from the Company, an aggregate principal amount of $6,000,000 of the
Company's Convertible Debentures, due June 9, 2002 (the "DEBENTURES"), which are
convertible into shares of common stock, par value (the "COMMON STOCK").
NOW THEREFORE, the Company and the Purchasers hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
1. THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall issue and sell to
the Purchasers and the Purchasers shall purchase from the Company the
Debentures for an aggregate purchase price of $6,000,000. The closing of the
purchase and sale of the Debentures (the "CLOSING") shall take place at the
offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("RSPAB"), 1290
Avenue of the Americas, New York, New York 10104, immediately following the
execution hereof or such later date as the parties shall agree. The date of
the Closing is hereinafter referred to as the "CLOSING DATE."
(ii) At the Closing, (a) the Company shall
deliver or shall cause to be delivered to (A) Strong River (1) Debentures
in the aggregate principal amount of $3,000,000 registered in the name of
Strong River, (2) a common stock purchase warrant (the "WARRANT"), in the
form of EXHIBIT D, registered in the name of Strong River, pursuant to which
Strong River shall have the right to acquire shares of Common Stock upon the
terms set forth therein, (3) the legal opinion of Perkins Coie LLP outside
counsel to the Company, substantially in the form of EXHIBIT C, (4) a waiver
of the Company's right to deliver a written notice to Strong River requiring
Strong River to purchase Tranche 2 Shares (as defined in that certain
Securities Purchase Agreement among the Company, Strong River and certain
other parties dated as of January 28, 1999 (the "SECURITIES PURCHASE
AGREEMENT")) and (5) all other documents, instruments and writings required
to have been delivered at or prior to the Closing Date by the Company to
Strong River pursuant to this Agreement, including an executed Registration
Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT")
and (B) Bay Harbor (1) Debentures in the aggregate principal amount of
$3,000,000 registered in the name of Bay Harbor, (2) the legal opinion of
Perkins Coie LLP outside counsel to the Company, substantially in the form of
EXHIBIT C, and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Closing Date by the Company to the
Purchasers pursuant to this Agreement, including the executed Registration
Rights Agreement and (b) Purchasers shall deliver (1) $6,000,000 in United
States dollars in immediately available funds by wire transfer to an account
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designated in writing by the Company for such purpose, (2) a certificate
acknowledging that Strong River shall no longer have any right to receive
Adjustment Shares (as defined in the Securities Purchase Agreement) pursuant
to the Securities Purchase Agreement and (3) all documents, instruments and
writings required to have been delivered at or prior to the Closing Date by
such Purchaser pursuant to this Agreement, including, without limitation, an
executed Registration Rights Agreement.
1.2 FORM OF DEBENTURES. The Debentures shall be in the form of
Exhibit A.
1.3 CERTAIN DEFINED TERMS. For purposes of this Agreement,
"CONVERSION PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the
meanings set forth in Exhibit A; "VESTING DATE" shall have the meaning set forth
in Exhibit D; "BUSINESS DAY" shall mean any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York and the State of Oregon are authorized or
required by law or other governmental action to close.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation, duly
incorporated and validly existing under the laws of the jurisdiction of its
incorporation, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
The Company has no subsidiaries other than those set forth on Schedule 2.1(a)
(collectively the "SUBSIDIARIES"). Each of the Subsidiaries is an entity, duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, be reasonably
expected to have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of this Agreement, the Registration Rights Agreement, the
Debentures and the Warrant (collectively, the "TRANSACTION DOCUMENTS"), and
otherwise to carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company and no further corporate action is
required by the Company. Each of the Transaction
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Documents has been duly executed by the Company and, when delivered (or
filed, as the case may be) in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
articles of incorporation, by-laws or other charter documents.
(c) CAPITALIZATION. The number of authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(c). No shares of
Common Stock are entitled to statutory preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in SCHEDULE 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Securities (as defined in Section 2.1(d)), rights
or obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Reports (as defined below) or SCHEDULE 2.1(c), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) or
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Shares. A "PERSON"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
(d) ISSUANCE OF THE SECURITIES The Securities are duly authorized,
and, when issued and paid for in accordance with the terms hereof or of the
Debentures or the Warrant (as the case may be), shall have been validly
issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind created by the Company
(collectively, "LIENS"). The Company has on the date hereof and will at all
times while the Debentures and the Warrant are outstanding, maintain an
adequate reserve of duly authorized Common Stock, reserved for issuance to
the holders of the Debentures and the Warrant, to enable it to perform its
conversion, exercise and other obligations under this Agreement, the
Debentures and the Warrant. With respect to the Securities to be issued
hereunder, such number of reserved and available shares of Common Stock is
not less than the sum (i) the maximum number of shares of Common Stock which
may be issued to the Purchasers upon the conversion of the aggregate
principal amount of the Debentures (the "CONVERSION SHARES"), assuming that
the average Per Share Market Value of the Common Stock utilized to determine
the Conversion Price is 50% of the Per Share Market Value on the Trading Day
immediately preceding the Closing Date and (ii) the maximum number shares of
Common Stock which may be issued to Strong River upon the exercise of the
Warrant (the "WARRANT SHARES") at any time after the Closing Date, assuming
that the Per Share Market Value of the Common Stock utilized to determine any
such Reset Price on such date is 50% of the Per Share Market Value on the
Trading Day immediately preceding the Closing Date (such number of shares of
Common Stock to be reserved prior to each Closing Date shall be referred to
as the "INITIAL MINIMUM"). All such
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authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Debentures and the Warrant. The Debentures, the Conversion
Shares, the Warrant and the Warrant Shares are collectively referred to as,
the "SECURITIES."
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Articles of Incorporation (as amended through the
date hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is listed or
traded), or by which any property or asset of the Company is bound or affected,
except in the case of each of clauses (ii) and (iii), as could not, individually
or in the aggregate, reasonably be expected to have or result in a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, could not reasonably be
expected to have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the registration statements
with the Commission meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Conversion Shares and the
Warrant Shares by the Purchasers, (ii) the application(s) to the Nasdaq National
Market (the "NASDAQ") for the listing of the Conversion Shares and the Warrant
Shares with the NASDAQ (and with any other national securities exchange or
market on which the Common Stock is then listed), (iii) applicable Blue Sky
filings, (iv) the filing of Current Reports on Form 8-K with the Commission
disclosing the transaction contemplated hereby, (v) the filing of Forms D with
the Commission as required by Regulation D promulgated under the Securities Act
and (vi) in all other cases where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (the consents, waivers, authorizations, orders, notices
and filings referred to in (i)-(iv) of this Section are, collectively, the
"REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county, local or
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foreign) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, individually or in the aggregate, be reasonably expected to have or
result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary (i)
is in default under or in violation of (and no event has occurred which has not
been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except, in each case as could not individually or
in the aggregate, reasonably be expected to, have or result in a Material
Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor, to the Company's
knowledge, any Person acting on its behalf has taken any action which could
subject the offering, issuance or sale of the Securities to the registration
requirements of the Securities Act. Neither the Company nor, to the Company's
knowledge, any Person acting on the Company's behalf has solicited any offer to
buy or sell the Securities by means of any form of general solicitation or
advertising.
(j) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the three years preceding the date hereof
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as the
"SEC REPORTS" and, together with the Schedules to this Agreement the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and, the rules and
regulations promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Reports to the extent required. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto and
the unaudited financial statement do not contain footnotes required by GAAP, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash
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flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Since March
31, 1999, except as specifically disclosed in the SEC Reports or SCHEDULE
2.1(j) annexed hereto, (a) there has been no event, occurrence or development
that has had or that could reasonably be expected to have or result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (c) the
Company has not altered its method of accounting or the identity of its
auditors and (d) the Company has not declared or made any payment or
distribution of cash or other property to its stockholders or officers or
directors (other than in compliance with existing Company stock option plans)
with respect to its capital stock, or purchased, redeemed (or made any
agreements to purchase or redeem) any shares of its capital stock. The
Company last filed audited financial statements with the Commission on May
17, 1999, and has not received any comments from the Commission in respect
thereof.
(k) INVESTMENT COMPANY. The Company is not, and is not an Affiliate (as
defined in Rule 405 under the Securities Act) of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. No fees or commissions will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement as a result of action by or on
behalf of the Company or any of its Affiliates.
(m) FORM S-3 ELIGIBILITY. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(n) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company has
not, in the two years preceding the date hereof, received notice (written or
oral) from the NASDAQ or any other stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been quoted) to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. The Company is currently in compliance
with all such maintenance requirements and no fact or circumstances currently
exist which could reasonably be expected to result in noncompliance with such
maintenance requirements in the foreseeable future.
(o) PATENTS AND TRADEMARKS. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and rights (collectively, the "INTELLECTUAL
PROPERTY RIGHTS") which are necessary or material for use in connection with its
business, and which the failure to so have would have a Material Adverse Effect.
To the best knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
(p) Registration Rights; Rights of Participation. Except as set forth
on SCHEDULE 6(b) to
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the Registration Rights Agreement, (i) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission
or any other governmental authority which has not been satisfied and (ii) no
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(q) REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess
such permits could not, individually or in the aggregate, have or result in a
Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(r) TITLE. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property and personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case free and clear of all Liens, except for liens, claims or encumbrances as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(s) DISCLOSURE. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company are true
and correct and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. The Purchasers
hereby represent and warrant to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate power and authority, to enter into and
to consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations thereunder. The purchase by each
Purchaser of the Securities hereunder has been duly authorized by all necessary
action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, to
sell or otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement
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under the Securities Act and in compliance with applicable federal and state
securities laws or under an exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof, it is, and at each conversion under
its Debentures and each exercise date under its Warrant, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF THE PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser has not been
organized for the sole purpose of acquiring the Securities.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser is
able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar.
(h) RELIANCE. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
(i) INVOLVEMENT IN CERTAIN PROCEEDINGS. Neither the Purchasers nor any
of their Affiliates has been involved in any of the proceedings described in
Section 401(f) of Regulation S-K under the Securities Act during the periods
described therein.
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(j) BENEFICIAL OWNERSHIP. Neither the Purchasers nor any of their
Affiliates is the beneficial owner of any shares of the Company's Common Stock
as of the trading day immediately preceding the Closing Date, other than shares
of Common Stock and warrants issued pursuant to that Securities Purchase
Agreement.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with any transfer agent
for the securities of the Company any transfer of Securities by such Purchaser
to any other fund under common management with such Purchaser (a "DESIGNEE") or
any transfer among any such Designees, provided that transferee certifies to the
Company that it is an "accredited investor" within the meaning of Rule 501(a)
under the Securities Act and that it is acquiring the Securities solely for
investment purposes. Any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed from the Debentures and the
Warrant, and the
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Company shall cause its transfer agent to issue a certificate or certificates
without any legend (upon surrender of the legended certificates duly
endorsed) to each holder of the Debentures and/or Warrant upon which it is
stamped if such legend is not required under applicable requirements of the
Securities Act and other applicable securities laws. Conversion Shares and
Warrant Shares shall not contain the legend set forth above nor any other
legend if the conversion of Debentures or exercise of Warrant as contemplated
by the Debentures or the Warrant, as the case may be, occurs at any time such
legend is not required under applicable requirements of the Securities Act
and the applicable securities laws.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Debentures and the
issuance of Warrant Shares upon exercise of the Warrant may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions.
3.3 FURNISHING OF INFORMATION. As long as the Company is subject to
Sections 13(a) and 15(d) of the Exchange Act, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. So long as any
of the Purchasers own Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to such Purchaser
and make publicly available in accordance with Rule 144(c) promulgated under
the Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act,
as well as any other information required thereby, in the time period that
such filings would have been required to have been made under the Exchange
Act. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request
of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 INCREASE IN AUTHORIZED SHARES. At such times as the Company
would be, if a notice of exercise or conversion were to be delivered on such
date, precluded from issuing such number of Conversion Shares as would be
issuable upon conversion in full of the Debentures or issuing such number of
Warrant Shares as would be issuable upon exercise in full of the Warrant due
to the unavailability of a sufficient number of shares of authorized but
unissued or reserved shares of Common Stock, the Company shall promptly (and
in any case, within 30 Business Days from such date) prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's Articles of Incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number
of shares as reasonably requested by the Purchasers in order to provide for
such number of authorized and unissued shares of Common Stock to enable the
Company to comply with its exercise and reservation of shares obligations as
set forth in this Agreement, the Debentures and the Warrant. In connection
therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such
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increase, (b) recommend to and otherwise use its best efforts to promptly and
duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60th day after delivery
of the proxy materials relating to such meeting) and (c) within five (5)
Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's Articles of Incorporation to evidence
such increase.
3.5 LISTING OF CONVERSION SHARES AND WARRANT SHARES. The Company shall
(i) not later than the tenth Business Day following the Closing Date prepare and
file with the NASDAQ (or such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) an
additional shares listing application covering a number of shares of Common
Stock which is not less than the Initial Minimum, (ii) take all steps necessary
to cause such shares to be approved for listing in the NASDAQ (or on the other
primary national securities exchange or market or trading or quotation facility
on which the Common Stock is then listed) as soon as possible thereafter, and
(iii) provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon.
3.6 EXERCISE AND ISSUANCE PROCEDURES. The Debentures set forth the
totality of the procedures with respect to the conversion of the Debentures,
including such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert the Debentures in accordance with their
terms. The Company shall honor any conversion of the Debentures and shall
deliver Conversion Shares in accordance with the terms, conditions and time
periods set forth in the Debentures. The Warrant sets forth the totality of the
procedures with respect to the exercise of the Warrant, including such other
information and instructions as may be reasonably necessary to enable Strong
River to exercise the Warrant in accordance with their terms. The Company shall
honor any exercise of the Warrant and shall deliver Warrant Shares in accordance
with the terms, conditions and time periods set forth in the Warrant.
3.7 SUBSEQUENT REGISTRATIONS. Except for (w) Tranche 1 Shares (as
defined in the Securities Purchase Agreement) (x) Conversion Shares and Warrant
Shares, (y) Common Stock to be registered for resale in connection with
financings permitted pursuant to paragraph (a) (i), (iii) and (iv) of Section
3.11 (a) of the Securities Purchase Agreement and (z) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement or Schedule 6(b) of that certain
Registration Rights Agreement among the Company, Strong River and certain other
parties, dated as of January 28, 1999 to be registered in the Underlying
Securities Registration Statement in accordance with the Registration Rights
Agreement, the Company shall not, without the prior written consent of the
Purchasers (i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) register for resale any securities of the Company, in
each case, for a period of not less than 120 Business Days after the date that
any registration statement covering the resale of any of the Conversion Shares
and the Warrant Shares by the Purchasers meeting the requirement of the
Registration Rights Agreement is declared effective by the Commission. Any days
that any Purchaser is unable to sell Conversion Shares or Warrant Shares under
any such registration statement shall be added to such 120 Business Day period
for the purposes of (i) and (ii) above.
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<PAGE>
3.8 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) issue within one (1) Business Day of each Closing a press release acceptable
to the Purchasers disclosing the transactions contemplated hereby, (ii) file
within ten (10) Business Days after each Closing Date with the Commission a
Current Report on Form 8-K disclosing the transactions contemplated hereby, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act and
provide a copy thereof to the Purchasers promptly after the filing thereof. The
Company shall, no less than two (2) Business Days prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof to
the Purchasers.
3.9 USE OF PROCEEDS. The Company shall not use the net proceeds form
the sale of Securities hereunder to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.10 LIMITATIONS ON SHORT SALES. Each Purchaser agrees that it will
not enter into any Short Sales (as hereinafter defined) from the period
commencing on the Closing Date and ending on the date which is 300 days after
the date hereof. For purposes of this Section 3.10, a "SHORT SALE" by a
Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
as a short sale and that is made at a time when there is no equivalent
offsetting long position in Common Stock held by the Purchaser. For purposes
of determining whether there is an equivalent offsetting long position in
Common Stock held by a Purchaser, Conversion Shares that have not yet been
converted pursuant to the Debenture shall be deemed to be held long by the
Purchaser, Warrant Shares that have not yet been exercised pursuant to the
Warrant shall be deemed to be held long by the Purchaser, and the number of
Conversion Shares and Warrant Shares then held by a Purchaser on any
particular date of computation shall be equal to (i) with respect to
Conversion Shares, such number of Conversion Shares issuable pursuant to the
Debenture assuming such holder converted all the outstanding principal amount
of the Debenture on such date and (ii) with respect to Warrant Shares, the
number of Warrant Shares issuable pursuant to the Warrant on the next Vesting
Date calculated as if such computation date were such Vesting Date (e.g.
using the lowest ten (10) Per Share Market Values during the twenty-five (25)
days immediately preceding such computation date).
3.11 REIMBURSEMENT. If either Purchaser, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred in an amount not to exceed
$100,000 in the aggregate for both Purchasers as a whole. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliate of such Purchaser who are actually named in such
action, proceeding or investigation, and partners,
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<PAGE>
directors, agents, employees and controlling persons (if any), as the case
may be, of such Purchaser and any Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, such Purchaser and any Affiliate and any such
Person. The Company also agrees that neither such Purchaser nor any
Affiliate, partners, directors, agents, employees or controlling persons
shall have any liability to the Company or any person asserting claims on
behalf of or in right of the Company in connection with or as a result of the
consummation of the Transaction Documents except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company
result from the negligence or willful misconduct of such Purchaser.
Notwithstanding anything to the contrary, the Company shall not be obligated
to pay any reimbursements hereunder in the event that a court, in a final
unappealable judgement, determines that such Purchaser is liable for the act
upon which reimbursement is sought and the Company may condition payment of
any reimbursement hereunder upon receipt of an undertaking reasonably
satisfactory to the Company to repay any such reimbursement.
3.12 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay $30,000 to RSPAB in
connection with the preparation and negotiation of the Transaction Documents.
Other than the amounts contemplated in the immediately preceding sentence, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Securities.
4.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the Debentures
and the Warrant contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
4.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile
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<PAGE>
at the facsimile telephone number specified in this Section prior to 6:00
p.m. (New York City time) on a Business Day, (ii) the Business Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in the Purchase
Agreement later than 6:00 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications
shall be as follows:
<TABLE>
<CAPTION>
<S> <C>
If to the Company: ThrustMaster, Inc.
7175 N.W. Evergreen Parkway #400
Hillsboro, Oregon 97124-5839
Facsimile: (503) 615-3297
Attention: Frank G. Hausmann, Jr., CEO
With copies to: Perkins Coie LLP
1211 SW Fifth Ave., Suite 1500
Portland, OR 97204
Facsimile: (503) 727-2222
Attention: Patrick Simpson
If to Strong River: Strong River Investments Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Facsimile: (212) 332-3256
Attention: Avi Vigder
If to Bay Harbor: Bay Harbor Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Facsimile: (212) 332-3256
Attention: Avi Vigder
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile: (212) 541-4630
Attention: Kenneth L. Henderson
</TABLE>
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
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4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers, or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder or under the Transaction Documents (other than
to a Designee of the respective Purchaser) without the consent of the Company,
except that the Purchasers may assign its rights hereunder and, subject to the
terms thereof, under the Transaction Documents without the consent of the
Company as long as such assignee demonstrates to the reasonable satisfaction of
the Company its satisfaction of the representations and warranties set forth in
Section 2.2.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closings and the issuances of the Warrant
Shares and Conversion Shares.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become
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effective when counterparts have been signed by each party and delivered to
the other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature page were an
original thereof.
4.11 PUBLICITY. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any of the Purchasers, or include the name of any of the Purchasers in any
filing with the Commission, or any regulatory agency, trading facility or stock
market without the prior written consent of the respective Purchaser, except to
the extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or by applicable rules, bylaws or policies of the
NASDAQ, in which case the Company shall provide the respective Purchaser with
prior notice of such disclosure.
4.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
COMPANY:
THRUSTMASTER, INC.
By:_____________________________________
Name:
Title:
PURCHASERS:
STRONG RIVER INVESTMENTS, INC.
By:_____________________________________
Name:
Title:
BAY HARBOR INVESTMENTS, INC.
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. A-[ ] $500,000.00
THRUSTMASTER, INC.
CONVERTIBLE DEBENTURE DUE JUNE 9, 2002
THIS DEBENTURE is one of a series of duly authorized issued debentures of
ThrustMaster, Inc., an Oregon corporation, having a principal place of business
at 7175 N.W. Evergreen Parkway #400, Hillsboro, Oregon 97124-5839 (the
"COMPANY"), designated as its Convertible Debentures, due June 9, 2002 (the
"DEBENTURES"), in an aggregate principal amount of $6,000,000.
FOR VALUE RECEIVED, the Company promises to pay to [___________] or
registered assigns (the "HOLDER"), the principal sum of Five Hundred Thousand
Dollars ($500,000.00), on or prior to June 9, 2002 or such earlier date as the
Debentures are required to be repaid as provided hereunder (the "MATURITY
DATE"). The principal of this Debenture is payable in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts, at the address of the Holder last appearing
on the records of the Company regarding registration and transfer of Debentures.
All amounts due hereunder shall be paid in cash. The Holder shall not be
entitled to receive any interest on this Debenture.
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of Debentures
outstanding to such Holder. No service charge will be made for such
registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 5)
<PAGE>
and may be transferred or exchanged only in compliance with the Purchase
Agreement, including, without limitation, the provisions of Section 3.1
thereof. Prior to due presentment to the Company fortransfer of this
Debenture, the Company and any agent of the Company may treat the Person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal in respect of this
Debenture (free of any claim of subordination), as and when the same shall
become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise); or
(ii) the Company shall fail for any reason to deliver certificates to
a Holder prior to the fifteenth (15th) day after the Conversion Date
pursuant to Section 4(b) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its intention not
to comply with requests for conversions of any Debentures in accordance
with the terms hereof.
(b) If any Event of Default occurs and is continuing, the full principal
amount of this Debenture (and, at the Holder's option, all other Debentures then
held by such Holder), together with other amounts owing in respect thereof, to
the date of acceleration shall become, immediately due and payable in cash. The
aggregate amount payable upon an Event of Default shall be equal to the sum of
(i) the Mandatory Prepayment Amount (as defined below). Interest shall accrue
on the Mandatory Prepayment Amount hereunder from the seventh day after such
amount is due (being the date of an Event of Default) through the date of
payment in full thereof at the rate of 18% per annum. All Debentures for which
the full Mandatory Prepayment Amount hereunder shall have been paid in
accordance herewith shall be promptly surrendered to or as directed by the
Company. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind with respect to such
Event of Default or acceleration, and the Holder may immediately thereafter and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such declaration may be rescinded and annulled by Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
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SECTION 4. CONVERSION.
(a)(i) This Debenture shall be convertible into shares of Common
Stock (subject to the limitations set forth in Section 4(a)(ii) hereof) at the
option of the Holder, in whole or in part at any time and from time to time
following the Original Issue Date. The number of shares of Common Stock
issuable upon a conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be converted by the Conversion
Price, as subject to adjustment as provided hereunder. The Holder shall effect
conversions by surrendering the Debentures (or such portions thereof) to be
converted, together with the form of conversion notice attached hereto as
EXHIBIT A (a "CONVERSION NOTICE") to the Company. Each Conversion Notice shall
specify the principal amount of Debentures to be converted and the date on which
such conversion is to be effected, which date may not be prior to the date such
Conversion Notice is deemed to have been delivered hereunder (a "CONVERSION
DATE"). If no Conversion Date is specified in a Conversion Notice, the
Conversion Date shall be the date that such Conversion Notice is deemed
delivered hereunder. If the Holder is converting less than all of the principal
amount represented by the Debenture(s) tendered by the Holder with the
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to such Holder (in the manner and within
the time set forth in Section 4(b)) a new Debenture for such principal amount as
has not been converted.
(ii) CERTAIN CONVERSION RESTRICTIONS.
(A) (1) The Holder may not convert Debentures hereunder to
the extent such conversion would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") and the rules thereunder) in excess of
4.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of the Debentures held by the Holder after
application of this Section. The Holder shall have the sole authority and
obligation to determine whether the restriction contained in this Section
applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which Debentures are
convertible shall be in the sole discretion of the Holder. The provisions of
this Section may be waived by a Holder (but only as to itself and not to any
other Holder) upon not less than 75 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
(2) The Holder may not convert Debentures to the extent
such conversion would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Debentures held by the Holder
after application of this Section. The Holder shall have the sole authority and
obligation to determine whether the restriction contained in this Section
applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which Debentures are
convertible shall be in the sole discretion of the Holder. The provisions of
this
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Section may be waived by a Holder (but only as to itself and not to any
other Holder) upon not less than 75 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
(B) Notwithstanding anything to the contrary set forth herein,
the Company shall not be obligated to issue in excess of an aggregate of 974,755
shares of Common Stock upon conversion of Debentures and any shares of Common
Stock issuable in connection with the Purchase Agreement, which number of shares
shall be subject to adjustment pursuant to Sections 4(c)(ii), (iii), and (v)
(such number of shares, the "ISSUABLE MAXIMUM"). The Issuable Maximum equals
19.99% of the number of shares of Common Stock outstanding immediately prior to
the Closing. Shares of Common Stock issued in respect of penalties and
liquidated damages hereunder shall not count towards the 974,755 share limit set
forth in this paragraph and shall be paid in cash as provided herein unless
otherwise agreed to by the Holders. If on any Conversion Date (A) the Common
Stock is listed for trading on NASDAQ, (B) the Conversion Price then in effect
is such that the aggregate number of shares of Common Stock that would then be
issuable to the Holder together with any shares of Common Stock previously
issued at a discount upon conversion of Debentures or otherwise issued in
connection with the Purchase Agreement, would equal or exceed the Issuable
Maximum, and (C) the Company shall not have previously obtained the vote of
shareholders (the "SHAREHOLDER APPROVAL"), if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market, Inc. (or any
successor entity) applicable to approve the issuance of shares of Common Stock
in excess of the Issuable Maximum pursuant to the terms hereof, then the Company
shall issue to the holder so requesting such number of shares of Common Stock
equal to the Issuable Maximum and, with respect to the remainder of shares of
Common Stock which would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum (the "EXCESS SHARES"), the Company shall have the
option to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 90th day after such request, or (2) deliver to such holder cash in an
amount equal to the product of (x) the Per Share Market Value on the applicable
Conversion Date, and (y) the number of shares of Common Stock in excess of such
holder's pro rata portion of the Issuable Maximum that would have otherwise been
issuable to the holder but for the provisions of this Section (such amount of
cash being hereinafter referred to as the "DISCOUNT EQUIVALENT"). If the
Company fails to pay the Discount Equivalent in full pursuant to this Section
within fifteen (15) days after the Company fails to obtain Shareholder Approval
pursuant to (1) above or the date payable pursuant to (2) above, the Company
will pay interest thereon at a rate of 9% per annum to the holder, accruing
daily from the applicable Conversion until such amount, plus all such interest
thereon, is paid in full. The Company and the Holder understands and agree that
shares of Common Stock issued to and then held by the Holder as a result of
conversion of Debentures or as a result of exercise of that certain warrant
issued to the Holder dated as of the Original Issue Date shall not be entitled
to cast votes on any resolution to obtain Shareholder Approval.
(b) (i) Not later than three Trading Days after the Conversion Date,
the Company will deliver or cause to be delivered to the Holder (i) a
certificate or certificates which shall be free of restrictive legends (other
than those required by Section 3.1(b) of the Purchase Agreement) representing
the number of shares of the Common Stock being acquired upon the conversion of
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Debentures (subject to the limitations set forth in Section 4(a)(ii) hereof),
and (ii) Debentures in a principal amount equal to the principal amount of
Debentures not converted; PROVIDED, HOWEVER, that the Company shall not be
obligated to issue certificates evidencing the shares of the Common Stock
issuable upon conversion of the principal amount of Debentures until Debentures
and the Conversion Notice are delivered for conversion to the Company or the
Holder notifies the Company that such Debenture has been mutilated, lost, stolen
or destroyed and complies with Section 8 hereof. If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the Holder by the later of (x) the third (3rd) Trading Day after a
Conversion Date and (y) the Trading Day after the Debentures and the Conversion
Notice are delivered to the Company, the Holder shall be entitled by written
notice to the Company at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion in which event the
Company shall immediately return the Debentures tendered for conversion. If the
Company fails to deliver to the Holder such certificate or certificates pursuant
to this Section prior to the later of the dates specified in clauses (x) and (y)
above (such later date, the "DELIVERY DATE"), the Company shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, $2,500 for each day
thereafter (but excluding the first day thereafter) until the Company delivers
such certificates (such amount shall be also be due for each Trading Day after
the date that the Holder may rescind such conversion until such date as the
Holder shall have received the return of the principal amount of Debentures
relating to such rescission). Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
(ii) In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(b)(i) by the Delivery Date, and if after the Delivery
Date the Holder purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by such Holder of the
Underlying Shares which the Holder was entitled to receive upon such
conversion (a "BUY-IN"), then the Company shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (i) the aggregate number of shares of Common Stock that such
Holder was entitled to receive from the conversion at issue multiplied by (2)
the market price of the Common Stock at the time of the sale giving rise to
such purchase obligation and (B) either return the aggregate principal amount
of Debentures for which such conversion was not honored or deliver to such
Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its conversion and delivery obligations
under Section 4(b)(i). For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 aggregate principal amount of Debentures, the
Company shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In. Notwithstanding anything contained herein to the
contrary, if a Holder
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requires the Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company timely pays in full
such payment, the Company shall not be required to pay such Holder liquidated
damages under Section 4(b)(i) in respect of the certificates resulting in
such Buy-In.
(c) (i) The conversion price (the "CONVERSION PRICE") in effect
on any Conversion Date shall be the lesser of $24.00 per share (the "INITIAL
CONVERSION PRICE") and (b) 88.89% of the average of the lowest ten (10) Per
Share Market Values during the twenty-five (25) Trading Days immediately
preceding such Conversion Date; provided, however, that at any time after the
Original Issue Date and prior to the 90th day after the Original Issue Date, the
Conversion Price shall not be lower than the Initial Conversion Price.
Notwithstanding anything else to the contrary herein, at any time after the
300th day after the Original Issue Date, the Conversion Price in effect on such
Conversion Date shall be fixed at the then effective Conversion Price on the day
which is 300 days after the Original Issue Date.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of the Common
Stock outstanding before such event and of which the denominator shall be the
number of shares of the Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to Holders of Debentures) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share Market
Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of the
Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase shares of the Common Stock the issuance of which resulted in an
adjustment in the Initial Conversion Price pursuant to this
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Section, if any such right or warrant shall expire and shall not have been
exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions
of this Section 4 after the issuance of such rights or warrants) had the
adjustment of the Initial Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case the
Initial Conversion Price at which Debentures shall thereafter be convertible
shall be determined by multiplying the Initial Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value of the Common Stock determined as of the
record date mentioned above, and of which the numerator shall be such Per Share
Market Value of the Common Stock on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith; PROVIDED, HOWEVER,
that in the event of a distribution exceeding ten percent (10%) of the net
assets of the Company, such fair market value shall be determined by a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"APPRAISER") selected in good faith by the holders of a majority in interest of
Debentures then outstanding; and PROVIDED, FURTHER, that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement, provided to the holders
of Debentures, of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of the Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(v) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall have
the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with any other amounts then owing hereunder in
respect of this Debenture only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange, and the Holders of the
Debentures shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which the then outstanding principal amount, together with any other
amounts then owing hereunder in respect of this Debenture could have been
converted immediately prior to
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such reclassification or share exchange would have been entitled or (B)
require the Company to prepay, in cash the aggregate of its outstanding
principal amount of Debentures, plus all other amounts due and payable
thereon, at a price determined in accordance with Section 3(b), provided,
however that the Conversion Price and the closing price per share utilized to
determine the Mandatory Prepayment Amount shall be determined on the date of
such reclassification or such compulsory share exchange. This provision
shall similarly apply to successive reclassifications or share exchanges.
(vi) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Conversion Price is adjusted pursuant to any
of Section 4(c)(ii) - (iv), the Company shall promptly mail to each Holder of
Debentures a notice setting forth the Initial Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(viii) If (A) the Company shall declare a dividend (or any
other distribution) on its Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, and in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of the Debentures, and
shall cause to be mailed to the Holders of Debentures at their last addresses as
they shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; PROVIDED, HOWEVER, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
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(ix) In case of any (1) merger or consolidation of the
Company with or into another Person that would constitute a Change of Control
Transaction, or (2) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property
of the Company or another Person; then such Holder shall have the right
thereafter to (A) convert its Debentures into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders
of Common Stock following such merger or consolidation, and such Holder shall
be entitled upon such event or series of related events to receive such
amount of securities, cash and property as the shares of Common Stock into
which such Debentures could have been converted immediately prior to such
merger or consolidation would have been entitled, (B) in the case of a merger
or consolidation, (x) require the surviving entity to issue shares of
convertible preferred stock or convertible debentures with such aggregate
stated value or in such face amount, as the case may be, equal to the
aggregate outstanding principal amount of Debentures then held by such
Holder, plus all other amounts owing thereon, which newly issued shares of
preferred stock or debentures shall have terms identical (including with
respect to conversion) to the terms of the Debenture (except, in the case of
preferred stock, as may be required to reflect the differences between debt
and equity) and shall be entitled to all of the rights and privileges of a
Holder of Debentures set forth herein and the agreements pursuant to which
the Debentures were issued (including, without limitation, as such rights
relate to the acquisition, transferability, registration and listing of such
shares of stock other securities issuable upon conversion thereof), and (y)
simultaneously with the issuance of such convertible preferred stock or
convertible debentures, shall have the right to convert such instrument only
into shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such merger or
consolidation, or (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (2) of this Section, tender or exchange
its Debentures for such securities, stock, cash and other property receivable
upon or deemed to be held by holders of Common Stock that have tendered or
exchanged their shares of Common Stock following such tender or exchange, and
such Holder shall be entitled upon such exchange or tender to receive such
amount of securities, cash and property as the shares of Common Stock into
which such Debentures could have been converted immediately prior to such
tender or exchange would have been entitled as would have been issued. In
the case of clause (B), the conversion price applicable for the newly issued
shares of convertible preferred stock or convertible debentures shall be
based upon the amount of securities, cash and property that each share of
Common Stock would receive in such transaction, the Conversion Price
immediately prior to the effectiveness or closing date for such transaction
and the Conversion Price stated herein. The terms of any such merger,
consolidation, tender or exchange shall include such terms so as continue to
give the Holders of Debentures the right to receive the securities, cash and
property set forth in this Section upon any conversion following such event.
This provision shall similarly apply to successive such events.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of the Common Stock solely
for the purpose of issuance upon conversion of the Debentures free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common Stock
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as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 4(c)) upon the
conversion of the outstanding principal amount of the Debentures. The Company
covenants that all shares of the Common Stock that shall be so issuable shall,
upon issue, be duly and validly authorized, issued and fully paid,
nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common Stock,
but may make a cash payment in respect of any final fraction of a share based on
the Per Share Market Value at such time. If the Company elects not, or is
unable, to make such a cash payment, the holder shall be entitled to receive, in
lieu of the final fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
7175 N.W. Evergreen Parkway #400, Hillsboro, Oregon 97124-5839 (facsimile number
(503) 615-3297, attention CEO or such other address or facsimile number as the
Company may specify for such purposes by notice to the Holders delivered in
accordance with this Section. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service or sent by certified or registered mail, postage prepaid,
addressed to each Holder of the Debentures at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:00 p.m. (New
York City time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 6:00 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.
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SECTION 5. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 50% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof (or by directors whose nomination was recommended by those
individuals who are directors as of the date hereof) in one or a series of
related transactions, (iii) the merger or consolidation of the Company with or
into another entity, or the sale of all or substantially all of the assets of
the Company in one or a series of related transactions or (iv) the execution by
the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii).
"COMMON STOCK" means the common stock, no par value, of the Company
and stock of any other class into which such shares may hereafter have been
reclassified or changed.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the sum
of (i) the principal amount of Debentures to be prepaid divided by the
Conversion Price on (x) the date the Mandatory Prepayment Amount is due or (y)
the date the Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the closing price per share of the Common Stock on (x) the date
the Mandatory Prepayment Amount is due or (y) the date the Mandatory Prepayment
Amount is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the NASDAQ or on such
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on which the Common Stock is then listed or quoted on
the date nearest preceding such date, or (b) if the Common Stock is not then
listed or quoted on the NASDAQ or on a Subsequent Market, the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau
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<PAGE>
Incorporated (or similar organization or agency succeeding to its functions
of reporting prices), then the average of the "Pink Sheet" quotes for the
relevant conversion period, as determined in good faith by the Holder, or (d)
if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority interest of the principal amount of the Debentures.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Purchase Agreement, dated
as of June 9, 1999, among the Company and the original Holders of Debentures, as
amended, modified or supplemented from time to time in accordance with its
terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of June 9, 1999, among the Company and the original Holders
of Debentures, as amended, modified or supplemented from time to time in
accordance with its terms.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
the NASDAQ or on such Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of Debentures in accordance with the terms hereof.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
SECTION 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and liquidated damages (if any) on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company. This
Debenture ranks PARI PASSU with all other Debentures now or hereafter issued
under the terms set forth herein.
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<PAGE>
SECTION 7. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof. As long as there are Debentures outstanding,
the Company shall not and shall cause it subsidiaries not to, without the
consent of the Holders, amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holders.
SECTION 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
SECTION 9. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably
submit to the non-exclusive jurisdiction of the state and federal courts sitting
in the City of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. Each of the Company and the Holder hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by receiving a copy thereof sent to the Company
at the address in effect for notices to it under this instrument and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
SECTION 10. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
SECTION 11. If any provision of this Debenture is invalid, illegal
or unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
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<PAGE>
SECTION 12. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day (or, if such next succeeding Business Day falls in
the next calendar month, the preceding Business Day in the appropriate calendar
month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
THRUSTMASTER, INC.
By:
------------------------------
Name:
Title:
Attest:
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-[ ] into shares of
common stock, no par value (the "Common Stock"), of ThrustMaster, Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith or as required by the terms of such
Debenture. No fee will be charged to the holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations: -------------------------------------------------
Date to Effect Conversion
-------------------------------------------------
Principal Amount of Debentures to be Converted
-------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------
Applicable Conversion Price
-------------------------------------------------
Signature
-------------------------------------------------
Name
-------------------------------------------------
Address
<PAGE>
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
THRUSTMASTER, INC.
WARRANT
Warrant No. A - 1 Dated: June 9, 1999
ThrustMaster, Inc., an Oregon corporation (the "Company"), hereby
certifies that, for value received, Strong River Investments, Inc., or its
registered and permitted assigns ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company up to the total number of shares
of Common Stock, no par value (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") calculated
pursuant to Section 3 of this Warrant at an exercise price equal to $.01 per
share (as adjusted from time to time as provided in Section 9, the "Exercise
Price"), at the times set forth herein through and including ninety (90) days
following the Second Vesting Date (as defined in Section 3) (the "Expiration
Date"), and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
<PAGE>
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) This Warrant is issued pursuant to
that Convertible Debenture Purchase Agreement between the Company and the
Holder dated as of June 9, 1999 (the "Purchase Agreement"). Neither this
Warrant nor any interest herein may be transferred except in compliance with
the provisions of section 3.1 of the Purchase Agreement and the provisions
hereof. The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at the office specified in or pursuant to Section
3(i). Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new
warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing
the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the
surrender hereof by the Holder to the office of the Company specified in or
pursuant to Section 3(g) for one or more New Warrants, evidencing in the
aggregate the right to purchase the number of Warrant Shares which may then
be purchased hereunder. Any such New Warrant will be dated the date of such
exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) The vesting of the Warrant Shares
which the Holder is permitted to acquire pursuant to this Warrant shall
occur on the dates set forth below. On each such date, this Warrant shall
vest on a cumulative basis with respect to a number of Warrant Shares
calculated pursuant to Section 3(b) below. Only the Warrant Shares that have
vested may be acquired upon exercise of this Warrant.
(i) The first vesting date (the
"First Vesting Date") shall be the twenty-fifth (25th) day following
the earlier to occur of (A) the Effectiveness Date and (B) the Effectiveness
Required Date, provided that if such day is not a business day, the next
succeeding business day (the Warrant Shares with respect to which this
Warrant is exercisable on the First Vesting Date are called the "Tranche A
Warrant Shares"); and
(ii) The second vesting date (the "Second
Vesting Date", and together with the First Vesting Date, the "Vesting Dates")
shall be the twenty-fifth (25th) day following the First Vesting Date,
provided that if such day is not a business day, the next succeeding business
day (the Warrant Shares with respect to which this Warrant is exercisable on
the Second Vesting Date are called the "Tranche B Warrant Shares").
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<PAGE>
(b) Except as otherwise set forth in this Warrant,
this Warrant shall vest and become exercisable on each Vesting Date with
respect to the number of Warrant Shares calculated in accordance with the
following formula:
(Applicable Share Number) x [18.00 - Reset Price]
--------------------------------------------------
Reset Price
If the number calculated in accordance with the foregoing formula is a negative
number, the Holder shall not be obligated to transfer any shares to the Company.
On each Vesting Date, the Company shall send a notice to the Holder setting
forth in reasonable detail its calculation of the number of Warrant Shares which
shall vest and be exercisable on such Vesting Date.
For purposes of this Warrant,
(i) "Applicable Share Number" means
with respect to the First Vesting Date and Second Vesting Date, 62,500
shares of Common Stock.
(ii) "Effectiveness Date" means the
effective date of the registration statement on Form S-3 (Registration No.
333-73333) meeting the requirements of the Registration Rights Agreement (the
ARegistration Rights Agreement@), dated as of January 28, 1999, among the
Company, the Holder and certain other parties.
(iii) "Effectiveness Required Date" means
the 90th day following the date hereof;
(iv) "Reset Price" means the average of
the lowest ten (10) Per Share Market Values (which need not occur on
consecutive Trading Days) during the twenty-five (25) Trading Days
immediately preceding the applicable Vesting Date.
(v) "Trading Day" means (a) a day on
which the Common Stock is traded on the Nasdaq National Market System or on
any other stock market or trading facility on which the shares of Common
Stock are listed or quoted (each, a "Subsequent Market"), as the case may be,
or (b) if the Common Stock is not listed on the Nasdaq National Market System
or on a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other government action to close; and
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<PAGE>
(vi) "Per Share Market Value" means on
any particular date (a) the closing bid price per share of the Common Stock
on such date on the Nasdaq National Market System ("Nasdaq") or on any
Subsequent Market, or if there is no such price on such date, then the
closing bid price on the Nasdaq or on such Subsequent Market on the date
nearest preceding such date, or (b) if the Common Stock is not then listed or
quoted on the Nasdaq or a Subsequent Market, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding
to its functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith by the
Holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an appraiser
selected in good faith by the Holders of a majority of the applicable
Registrable Securities.
(c) The vesting of the Warrant Shares in
accordance with this Section 3 shall not be affected by any failure by the
Company to maintain the effectiveness of the Registration Statement after it
has been declared effective by the Securities and Exchange Commission (the
"Commission").
(d) Notwithstanding the foregoing provisions
of this Section 3, at any time within ten (10) Trading Days following the
occurrence of any of the following events (each, an "Event"), the Holder
shall have the option to elect by notice ("Vesting Notice") to the Company to
have this Warrant vest with respect to those Warrant Shares that have not yet
already vested:
(i) upon the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of in excess of 50% of
the voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Company's board of directors which is not
approved by those individuals who are members of the board of directors on
the date hereof (or by directors whose nomination was recommended by those
individuals who are directors as of the date hereof) in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of
the Company in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's
securities prior to the first such transaction continue to hold at least 50%
of the securities of the surviving entity or acquirer of such assets or (iv)
the execution by the Company of an agreement to which the Company is a party
or by which it is bound, providing for any of the events set forth above in
(i), (ii) or (iii);
(ii) immediately prior to an assignment
by the Company for the benefit of creditors or commencement of a voluntary
case under the Federal Bankruptcy Code, or an entering into of an order for
relief in an involuntary case under the Federal Bankruptcy Code, or adoption
by the Company of a plan of liquidation or dissolution; or
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<PAGE>
(iii) five Business Days prior to the
proposed consummation with respect to the Company of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act (or, if
necessary, such earlier date as the Company shall determine in good faith to
be required in order for the Holder to be able to participate in such
transaction), it being agreed that the Holder will receive actual notice of
the 13e-3 Statement filed with the Commission on the date filed and actual
notice of the date of acceleration hereunder no later than such date, and
that if such transaction is not consummated, and this Warrant has been
exercised, then the Holder (and to the extent that this Warrant would not but
for this paragraph be exercisable, the Company) shall be entitled to declare
the exercise null and void and the Holder shall, upon return of the Warrant
Shares to the Company, be entitled to receive a refund of the Exercise Price
and warrants identical to this Warrant, and such acceleration shall become
void AB INITIO, and the Warrants shall (as to any remaining unexercised
portion thereof) remain in full force and effect in accordance with the terms
hereof.
In the event the Holder delivers a Vesting Notice, this Warrant shall vest
with respect to the number of Warrant Shares calculated in accordance with
the formula set forth on Section 3(b); PROVIDED, HOWEVER that for purposes of
such calculation, (i) the "Applicable Share Number" shall be deemed to mean
(A) 125,000 shares of Common Stock, if the Event occurred prior to the First
Vesting Date, and (B) 62,500 shares of Common Stock if the Event occurred on
or after the First Vesting Date but prior to the Second Vesting Date; and
(ii) the "Reset Price" shall be deemed to mean the average of the lowest ten
(10) Per Share Market Values (which need not occur on consecutive Trading
Days) during the twenty (25) Trading Days immediately preceding the date on
which the Event occurred.
(e) Subject to Sections 3 (a), 3(b) and 11, this
Warrant shall be exercisable by the registered Holder on any Business Day
before 5:30 P.M., New York City time, at any time and from time to time on or
after the date hereof to and including the Expiration Date. At 5:30 P.M., New
York City time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value. For
purposes of this Warrant, "Business Day" means any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York or Oregon are authorized or required by
law or other government action to close.
(f) Subject to Sections 2(b), 6, 10, 11 and 12
upon surrender of this Warrant, with the Form of Election to Purchase
attached hereto duly completed and signed, to the Company at its address for
notice set forth in Section 13 and upon payment of the Exercise Price
multiplied by the number of Warrant Shares that the Holder intends to
purchase hereunder, in the manner provided hereunder, all as specified by the
Holder in the Form of Election to Purchase, the Company shall promptly (but
in no event later than 5 Trading Days after the Date of Exercise (as defined
herein)) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Warrant Shares issuable upon such exercise,
free of restrictive legends, except either in the event that (i) a
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder is not then effective or (ii)
the Warrant Shares are not freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act of 1933,
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<PAGE>
as amended (the "Securities Act"). Any person so designated by the Holder to
receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto (or
attached to such New Warrant) appropriately completed and duly signed, and
(ii) payment of the Exercise Price for the number of Warrant Shares so
indicated by the holder hereof to be purchased.
(g) If the Company fails to deliver to the
Holder certificate or certificates representing the Warrant Shares
pursuant to Section 3(f) by the fifth (5) Trading Day after the Date of
Exercise, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, $1,000 for each day after such fifth (5)
Trading Day until such certificates are delivered. Nothing herein shall limit
the Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon exercise within
the period specified herein and the Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
(h) In addition to any other rights available to
the Holder, if the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 3(f) by the
fifth (5) Trading Day after the Date of Exercise, and if after such fifth (5)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such exercise
(a "Buy-In"), then the Company shall pay in cash to the Holder (in addition
to any remedies available to or elected by the Holder) the amount by which
(x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that the Holder is
attempting to acquire by delivery of the Notice to Purchase by (B) the Per
Share Market Value on the Trading Day (or if such date is not a Trading Day,
on the immediately succeeding Trading Day) the certificate representing such
Warrant Shares are delivered to the Holder by or on behalf of the Company
(and if there is more than one certificate representing the Warrant Shares
and they are delivered on different Trading Days, clause (y)(B) of this
Section shall be the weighted average of the Per Share Market Values on the
Trading Days on which such certificates are delivered, based on the number of
Warrant Shares represented by each such certificate) . For example, if the
Holder purchases 10,000 shares of Common Stock having a total purchase price
of $90,000 to cover a Buy-In with respect to an attempted exercise of this
Warrant with respect to 10,000 Warrant Shares, and the Per Share Market Value
on the Trading Day the Holder receives the certificate representing such
Warrant Shares is $8.00 the Company shall be required to pay the Holder
$10,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In. Notwithstanding
anything contained herein to the
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<PAGE>
contrary, if a Holder requires the Company to make payment in respect of a
Buy-In for the failure to timely deliver certificates hereunder and the
Company timely pays in full such payment, the Company shall not be required
to pay such Holder liquidated damages under Section 3(g) in respect of the
certificates resulting in such Buy-In.
(i) Subject to Sections 3(a), 3(b) and 11, this
Warrant shall be exercisable, either in its entirety or, from time to time,
for a portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant
Shares for which no exercise has been evidenced by this Warrant.
4. PIGGYBACK REGISTRATION RIGHTS. During the term of this
Warrant, at any time when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, the Holder shall be entitled to the Piggyback
registration rights afforded to a holder pursuant to Section 6(d) of the
Registration Rights Agreement.
5. [INTENTIONALLY OMITTED]
6. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or other charge which may be payable in respect of any transfer of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder, and the Company shall not be required to issue or cause to be issued or
deliver or cause to be delivered the certificates for Warrant Shares unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or other charge or shall have established to
the satisfaction of the Company that such tax or other charge has been paid. The
Holder shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Warrant or receiving Warrant Shares upon
exercise hereof.
7. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested., satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. RESERVATION OF WARRANT SHARES. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise
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<PAGE>
of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9) created by the Company. The
Company covenants that all Warrant Shares that shall be so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
9. CERTAIN ADJUSTMENTS. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 9. Upon each such adjustment of
the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior
to the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this
Warrant is outstanding, (i) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or on any other
class of capital stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, or (iii)
combine outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision or combination, and shall apply to successive
subdivisions and combinations.
(b) In case of any reclassification of the
Common Stock, any consolidation or merger of the Company with or into
another person, or any compulsory share exchange pursuant to which the Common
Stock is converted into other securities, cash or property, then the Holder
shall have the right thereafter to exercise this Warrant (at the aggregate
Exercise Price in effect for all shares of Common Stock issuable upon such
exercise immediately prior to such consummation as adjusted to the time of
such transaction) only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder
would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification, consolidation, merger or share
exchange. The terms of any such consolidation, merger or share exchange shall
include such terms so as to continue to give to the Holder the right to
receive the securities or property set forth in this Section 9(b) upon any
exercise following any such reclassification, consolidation, merger or share
exchange.
-8-
<PAGE>
(c) If the Company, at any time while this
Warrant is outstanding, shall distribute (a "Distribution") to all holders
of Common Stock (and not to holders of this Warrant) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Sections 9(a), (b) and (d)
(collectively, "Rights"), then in each such case the Holder shall be entitled
to receive, for each Warrant Share with respect to which this Warrant is
exercised after the record date fixed for determination of stockholders
entitled to receive such Distribution, the Rights received by all holders of
Common Stock with respect to one share of Common Stock.
(d) [INTENTIONALLY OMITTED]
(e) For the purposes of this Section 9, in case
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution
payable in Common Stock or in securities convertible or exchangeable into
shares of Common Stock, or (B) to subscribe for or purchase Common Stock or
securities convertible or exchangeable into shares of Common Stock, then such
record date shall be deemed to be the date of the issue or sale of the shares
of Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(f) All calculations under this Section 9 shall be
made to the nearest cent or nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted
pursuant to Section 9(c) above, the Holder, after receipt of the
determination by the appraiser selected by the Company (the "Appraiser"),
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall be
equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to
the Company, a notice setting forth the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
Such adjustment shall become effective immediately after the record date
mentioned above. The Holder shall pay the expenses of such second appraiser.
(h) If:
(i) the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the
granting to all holders of the Common
Stock rights or warrants to
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<PAGE>
subscribe for or purchase any shares
of capital stock of any class or of any
rights; or
(iv) the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the Common
Stock of the Company, any consolidation
or merger to which the Company is a
party or any compulsory share exchange
whereby the Common Stock is converted
into other securities, cash or property;
or
(v) the Company shall authorize the
voluntary dissolution, liquidation or
winding up of the affairs of the
Company,
then the Company shall cause to be mailed to the Holder at its last address as
it shall appear upon the Warrant Register, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; PROVIDED, HOWEVER, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. PAYMENT OF EXERCISE PRICE. The Holder may pay the Exercise
Price in one of the following manners:
(a) CASH EXERCISE. The Holder shall deliver
immediately available funds; or
(b) CASHLESS EXERCISE. The Holder shall
surrender this Warrant to the Company together with a notice of cashless
exercise, in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
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<PAGE>
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
A = the average of the closing sale prices
of the Common Stock on the Nasdaq National
Market for the five (5) trading days
immediately prior to (but not including) the
Date of Exercise as reported by Bloomberg
Information Systems, Inc. (or any successor
to its function of reporting stock prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. CERTAIN EXERCISE RESTRICTIONS.
(a) The Holder agrees not to exercise this Warrant
to the extent such exercise would result in the Holder beneficially owning
(as determined in accordance with Section 13(d) of the Exchange Act and the
rules thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon exercise of this
Warrant after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in
this Section applies. The provisions of this Section may be waived by the
Holder (but only as to itself and not to any other holders of the other
Warrant) upon not less than 75 days prior notice to the Company (in which
case, the Holder shall make such filings with the Commission, including under
Regulation 13D or 13G, as are required by applicable law). The holders of the
Other Warrant shall be unaffected by any such wavier.
(b) The Holder also agrees not to exercise this
Warrant to the extent such exercise would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act
and the rules thereunder) in excess of 9.999% of the then issued and
outstanding Common Stock, including shares issuable upon exercise of this
Warrant after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in
this Section applies. The provisions of this Section may be waived by the
Holder upon not less than 75 days prior notice to the Company.
12. FRACTIONAL SHARES. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 12, be issuable on the
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<PAGE>
exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
13. NOTICES. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:00 p.m. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service
with next day delivery specified thereon, or (iv) upon actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 7175 NW Evergreen Parkway
#400, Hillsboro, Oregon, facsimile number (503) 615-3297, attention Chief
Executive Officer, or (ii) if to the Holder, to the Holder at the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section 13.
14. WARRANT AGENT.
(a) The Company shall serve as warrant agent under
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent.
(b) Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party
or any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
15. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this
Warrant shall be construed to give to any person or corporation other than
the Company and the Holder any legal or equitable right, remedy or cause
under this Warrant. This Warrant shall inure to the sole and exclusive
benefit of the Company and the Holder.
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<PAGE>
(c) This Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do
not constitute a part of this Warrant and shall not be deemed to limit or
affect any of the provisions hereof.
(e) In case any one or more of the provisions of
this Warrant shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Warrant
shall not in any way be affected or impaired thereby and the parties will
attempt in good faith to agree upon a valid and enforceable provision which
shall be a commercially reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Warrant.
(f) This Warrant shall terminate and be of no
further force and effect on the earlier of 5:00 p.m. (New York City time) on
the Expiration Date or the date on which the Warrant has been exercised in
full, except that the provisions of Sections 6 and 8 shall remain in full
force and effect after such termination date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
THRUSTMASTER, INC.
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To ThrustMaster, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), no par value, of ThrustMaster, Inc.
and, if such Holder is not utilizing the cashless exercise provisions set forth
in this Warrant, encloses herewith $________ in cash, certified or official bank
check or checks, which sum represents the aggregate Exercise Price (as defined
in the Warrant) for the number of shares of Common Stock to which this Form of
Election to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
[The undersigned elects that this Warrant be exercised in accordance
with Section 10(b) hereof.]
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
-------------------------------
- -----------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
- -----------------------------------------------------------------------------
(Please print name and address)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Dated: , Name of Holder:
---------------
(Print)
----------------------------
(By:)
----------------------------
(Name:)
(Title:)
<PAGE>
(Signature must conform in all respects
to name of holder as specified on the face
of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________ the right represented by the
within Warrant to purchase ____________ shares of Common Stock of
ThrustMaster, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of
ThrustMaster, Inc. with full power of substitution in the premises. The
undersigned hereby certifies that it has fully complied with Section 2 of the
Warrant and Section 3.1 of the Purchase Agreement with respect to this
transfer and assignment.
Dated:
- ---------------, ----
-----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
--------------------------------------
Address of Transferee
--------------------------------------
--------------------------------------
In the presence of:
- --------------------------
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of June 9, 1999, among ThrustMaster, Inc., an Oregon
corporation (the "COMPANY"), Strong River Investment Inc. ("STRONG RIVER"), a
corporation organized under the laws of the British Virgin Islands, and Bay
Harbor Investments, Inc. ("BAY HARBOR"), a corporation organized under the laws
of the British Virgin Islands. Strong River and Bay Harbor are each referred to
herein as a "Purchaser" and are collectively referred to herein as the
"PURCHASERS".
This Agreement is made pursuant to the Convertible Debenture Purchase
Agreement, dated as of the date hereof, between the Company and the Purchasers
(the "PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(o).
"AFFILIATE" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York or Oregon generally are authorized or required by law or other
government actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, no par value.
"CONVERSION SHARES" means the common stock issued or issuable
upon conversion of the principal amount of the Debentures.
<PAGE>
"DEBENTURES" means the Convertible Debentures issued by
the Company pursuant to the Purchase Agreement.
"EFFECTIVENESS DATE" means with respect to the Registration
Statement to be filed with respect to the Conversion Shares and the Warrant
Shares, the 90th day following the Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"FILING DATE" means with respect to the Registration
Statement to be filed with respect to the Conversion Shares and the Warrant
Shares, the 35th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the
case may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PER SHARE MARKET VALUE" means on any particular date (a)
the closing bid price per share of the Common Stock on such date on the
Nasdaq National Market or on any other stock market or trading facility on
which the shares of Common Stock are primarily traded, listed or quoted (each
a "SUBSEQUENT MARKET"), or if there is no such price on such date, then the
closing bid price on the Nasdaq National Market or on such Subsequent Market
on the date nearest preceding such date, or (b) if the Common Stock is not
then listed or quoted on the Nasdaq National Market or a Subsequent Market,
the closing bid price for a share of Common Stock in the over-the-counter
market, as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at
the close of business on such date, or (c) if the Common Stock is not then
reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Holders of a
majority of the applicable Registrable Securities.
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
<PAGE>
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including,
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<PAGE>
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in a
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part
of an effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"REGISTRATION DELAY PAYMENTS" shall have the meaning set forth
in Section 2(d).
"REGISTRABLE SECURITIES" means the Conversion Shares and
the Warrant Shares; PROVIDED, HOWEVER that in order to account for the fact
that (i) the number of Warrant Shares that are issuable upon exercise of the
Warrants is determined in part upon the Per Share Market Value of the Common
Stock after the Closing Date, Registrable Securities shall include (but not
be limited to) such number of Warrant Shares which may be issued or issuable
to Strong River pursuant to the Warrant on each Vesting Date (as defined in
the Warrant), assuming, for the purposes of this definition, that the Per
Share Market Value utilized to determine the Reset Price is 50% of the Per
Share Market Value on the trading day immediately preceding the Closing Date
and (ii) the number of Conversion Shares that are issuable upon conversion of
the Debentures is determined in part upon the Per Share Market Value of the
Common Stock after the Closing Date, Registrable Securities shall include
(but not be limited to) such number of Conversion Shares, which may be issued
or issuable to such Purchaser pursuant to the Debenture, assuming for
purposes of this definition, that the Per Share Market Value utilized to
determine the Conversion Price is 50% of the Per Share Market Value on the
trading day immediately preceding the Closing Date. The Company shall be
required to file additional Registration Statements to the extent the sum of
the shares of Common Stock issuable as Warrant Shares and Conversion Shares
exceeds the number of shares initially registered in accordance with the
proviso in the immediately prior sentence. The Company shall have twenty-five
(25) days to file such additional Registration Statements after notice of the
requirement thereof, which the Holders may give at such time when the number
of shares of Common Stock referenced in the preceding sentence exceeds 85% of
the number of shares of Common Stock then registered in a Registration
Statement hereunder. Notwithstanding the foregoing, shares of Common Stock
shall no longer be treated as Registrable Securities when (x) a registration
statement covering such Registrable Securities has been declared effective
and such Registrable Securities have been disposed of pursuant to such
effective registration statement, (y) such Registrable Securities are sold or
otherwise transferred by a person or entity in a transaction in which the
rights under this Agreement are not assigned in accordance with Section 6(h)
or (z) the Holder of such Registrable Securities is able to dispose of all
Registrable Securities held by such Holder in one three-month period pursuant
to Rule 144(k) (or any similar provision then in force) under the Securities
Act without registration under the Securities Act.
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<PAGE>
"REGISTRATION STATEMENTS" means the registration statements
and any additional registration statements contemplated by Section 2(a),
including (in each case) the Prospectus, amendments and supplements to such
registration statements or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statements.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means, collectively, the Conversion Shares and the
Warrant Shares.
"SPECIAL COUNSEL" means one special counsel to all Holders of
Registrable Securities, for which the Holders will be reimbursed by the Company
pursuant to Section 4.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means
a registration in connection with which securities of the Company are sold to
an underwriter for reoffering to the public pursuant to an effective
registration statement.
"WARRANTS" means the Common Stock purchase warrants issued
or issuable to Strong River pursuant to the Purchase Agreement.
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise in full of the Warrants.
2. SHELF REGISTRATION
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering
Registrable Securities as set forth in the definition of "Registrable
Securities", for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
applicable Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under
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<PAGE>
the Securities Act until the date which is three years after the date that
such Registration Statement is declared effective by the Commission or such
earlier date when all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume restrictions pursuant
to Rule 144(k) as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to the
Company's transfer agent (the "EFFECTIVENESS PERIOD"), provided, however,
that the Company shall not be deemed to have used its best efforts to keep
the Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able
to sell the Registrable Securities covered by such Registration Statement
during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective. The
aggregate number of Registrable Securities under a Registration Statement
shall be allocated among Holders pro rata based on the total number of
Registrable Securities issued or issuable as of the date such Registration
Statement is declared effective by the Commission. All of the provisions of
this Section 2(a) relating to a Registration Statement shall apply to any
additional Registration Statement covering any Warrant Shares and Conversion
Shares as described in the definition of Registrable Securities.
(b) If the Holders of a majority of the Registrable
Securities then outstanding so elect, an offering of Registrable Securities
pursuant to a Registration Statement may be effected in the form of an
Underwritten Offering. In such event, and, if the managing underwriters
advise the Company and such Holders in writing that in their opinion the
amount of Registrable Securities proposed to be sold in such Underwritten
Offering exceeds the amount of Registrable Securities which can be sold in
such Underwritten Offering, there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of
such managing underwriters can be sold, and such amount shall be allocated
pro rata among the Holders proposing to sell Registrable Securities in such
Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the underwriter(s) will be selected by the Holders of a
majority of the Registrable Securities included in such offering and, except in
connection with a block trade, such investment banker shall be subject to
approval by the Company, which approval shall not be unreasonably withheld or
delayed. No Holder may participate in any Underwritten Offering hereunder unless
such Holder (i) agrees to sell its Registrable Securities on the basis provided
in any underwriting agreements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such arrangements.
(d) If (i) a Registration Statement covering Registrable
Securities to be covered thereby as set forth herein is not filed on or before
the Filing Date (if the Company files such Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 12d1-2 promulgated
under the Exchange Act within five (5) Business Days
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<PAGE>
of the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be
"reviewed" or is not subject to further review; or (iii) the initial
Registration Statement covering Registrable Securities is not declared
effective by the Commission on or before the Effectiveness Date, or (iv)
after a Registration Statement has been declared effective by the Commission,
such Registration Statement is either not effective as to all Registrable
Securities to be covered thereby as set forth herein throughout the
applicable Effectiveness Period for a period of more than ten (10) days or
the Holders are not permitted by reason of the last paragraph of Section 3 to
make sales thereunder for a period of ten (10) days during such period, or
(v) an amendment to the Registration Statement is not filed by the Company
with the Commission within ten (10) days of the Commission's notifying the
Company that such amendment is required in order for a Registration Statement
to be declared effective (any such failure or breach being referred to as an
"EVENT," and for purposes of clauses (i) and (iii) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five (5)
Business Day period is exceeded, or for purposes of clauses (iv) and (v) the
date on which such ten (10) day period is exceeded, being referred to as
"EVENT DATE"), then, in any such case, as partial relief for the damages
suffered therefrom by the Holders (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall, on the
Event Date and on each monthly anniversary following the Event Date until the
triggering Event in cured, pay to the Holders an aggregate amount, in cash,
as liquidated damages and not as a penalty equal to 2.0% of the purchase
price paid by the Purchasers to the Company pursuant to the Purchase
Agreement on the Closing Date, (the "PURCHASE PRICE"), PROVIDED, HOWEVER that
in the event that the Registration Statement is filed on or before the
applicable Filing Date and the Company has breached any one or more of its
requirements pursuant to clause (ii) through (v) herein, the Company shall
pay to the Holders an aggregate amount equal to 1% of the Purchase Price on
the Event Date and 2% of the Purchase Price on each monthly anniversary
following the Event Date until the triggering Event is cured. The payments to
which a Holder shall be entitled pursuant to this Section are referred to
herein as "REGISTRATION DELAY PAYMENTS." Registration Delay Payments shall be
calculated on a cumulative basis and paid within five (5) Business Days of
the Event Date and each monthly anniversary thereof. If the Company fails to
make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of 9.0% per annum until paid in
full. Notwithstanding anything to the contrary, the Company shall not be
required to make any Registration Delay Payments if an Event described above
arises as a result of (i) any comments by the Commission relating to or
directed at any of the Holders in connection with a Registration Statement or
(ii) the fact that the Commission refuses to accept, review or declare
effective a Registration Statement because Warrant Shares or Conversion
Shares are being included in such Registration Statement.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a
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Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to
by the Company and the Holders) which shall contain the "Plan of
Distribution" attached hereto as ANNEX A (except if otherwise directed by the
Holders), and cause the Registration Statement to become effective and remain
effective as provided herein; PROVIDED, HOWEVER, that not less than five (5)
Business Days prior to the filing of a Registration Statement or any related
Prospectus or any amendment or supplement thereto, the Company shall, (i)
furnish to the Holders, their Special Counsel and any managing underwriters,
copies of all such documents proposed to be filed, which documents will be
subject to the review of such Holders, their Special Counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders and such underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period; (ii) cause the
related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as reasonably possible to any comments received from
the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five (5) days prior to
such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement (the
Company shall provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the
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Commission or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any
or all of the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of
a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably request
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that
the Company shall not be required to take any action pursuant to this Section
3(e) that would, in the opinion of counsel for the Company, violate applicable
law or be materially detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale
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of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the applicable
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least two Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will 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, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market or any Subsequent Market, as and when required pursuant to the Purchase
Agreement.
(l) In the case of an Underwritten Offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and deliver
copies thereof to each
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Holder and the managing underwriters, if any, of opinions of counsel to the
Company and updates thereof addressed to each Holder and each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders covering the
matters customarily covered in opinions requested in Underwritten Offerings
and such other matters as may be reasonably requested by such Special Counsel
and underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, use its
reasonable best efforts to obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed to the Company in form and
substance as are customary in connection with Underwritten Offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 5 (or
such other provisions and procedures acceptable to the managing underwriters,
if any, and holders of a majority of Registrable Securities participating in
such Underwritten Offering); and (v) deliver such documents and certificates
as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
(m) In connection with any Underwritten Offering, make
available for inspection by the selling Holders, any representative of such
Holders, any underwriter participating in any disposition of Registrable
Securities, and any attorney or accountant retained by such selling Holders or
underwriters, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors, agents and employees of the Company and its subsidiaries to supply
all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; PROVIDED, HOWEVER, that any information that is
determined in good faith by the Company in writing to be of a confidential
non-public nature at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities; (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
(n) Comply with all applicable rules and regulations of the
Commission.
(o) The Company may require each selling Holder to furnish
to the Company
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such information regarding the distribution of such Registrable Securities
and the beneficial ownership of Common Stock held by such Holder and any
other matter as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such
information within a time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the final Prospectus as then amended or supplemented as contemplated
in Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements and all other provisions of the
Securities Act as applicable to any of them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv) or
3(c)(v), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "ADVICE")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not pursuant
to an Underwritten Offering and whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without
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limitation, fees and expenses (a) with respect to filings required to be made
with the Nasdaq National Market and any Subsequent Market on which the Common
Stock is then listed for trading, and (B) reasonably incurred in compliance
with state securities or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of Special Counsel for the Holders in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
managing underwriters, if any, or by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses of the Company, (iv) fees and
disbursements of counsel for the Company and reasonable fees and expense
disbursements of Special Counsel for the Holders, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated
by this Agreement (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder.
(b) If the Holders require an Underwritten Offering pursuant
to the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants which will be paid by the Holders. The Holder
shall pay all transfer taxes relating to the Registrable Securities. By way of
illustration which is not intended to diminish from the provisions of Section
4(a), the Holders shall not be responsible for, and the Company shall be
required to pay the fees or disbursements incurred by the Company (including by
its legal counsel and accountants) in connection with, the preparation and
filing of a Registration Statement and related Prospectus for such offering, the
maintenance of such Registration Statement in accordance with the terms hereof,
the listing of the Registrable Securities in accordance with the requirements
hereof, and printing expenses incurred to comply with the requirements hereof.
Notwithstanding the foregoing, except in connection with a block trade by a
broker who as a result of the trade may be deemed an underwriter, if at any time
the Company has (i) timely filed the Registration Statement on or prior to the
applicable Filing Date, (ii) caused the Registration Statement to be declared
effective as promptly as possible after the filing thereof but in any event
prior to the applicable Effectiveness Date and (iii) kept the Registration
Statement continuously effective under the Securities Act, all in accordance
with the terms of this Agreement, and if at any such time the Holders require an
Underwritten Offering pursuant to the terms hereof, then Holders shall be
responsible for all costs, fees and expenses in connection with such
Underwritten Offering.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors,
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agents (including any underwriters retained by such Holder in connection with
the offer and sale of Registrable Securities), brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable
law, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or, to the extent such
untrue or alleged untrue statements or omissions or alleged omissions is not
corrected in a subsequent prospectus, in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except to the extent, but only to the extent, that such untrue
statements or alleged untrue statements or omissions or alleged omissions are
based upon information furnished in writing to the Company by such Holder or
such other indemnified party expressly for use therein, which information was
reasonably relied on by the Company for use therein, or to the extent that
such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by or was furnished by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which
the Company is aware in connection with the transactions contemplated by this
Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied on by the Company for
use in the Registration Statement, such Prospectus or such form of prospectus or
to the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by or was furnished by such Holder expressly for
use in the
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Registration Statement, such Prospectus or such form of Prospectus, or in any
amendment or supplement thereto. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel (which shall be reasonably acceptable to the indemnifying party) that
a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; PROVIDED, that
the Indemnifying Party may require such Indemnified
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Party to undertake to reimburse all such fees and expenses to the extent it
is finally judicially determined that such Indemnified Party is not entitled
to indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by
PRO RATA allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d), no
Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and
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hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specified in SCHEDULE 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not, except as set forth in Section
3.11(b) of the Purchase Agreement, grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
specified in SCHEDULE 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and, except as set forth in Section 3.7 of the Purchase
Agreement, the Company shall not after the date hereof enter into any agreement
providing any such right to any of its security holders.
(d) PIGGY-BACK REGISTRATIONS. (i) If at any time when there is
not an effective Registration Statement covering all of the Registrable
Securities then outstanding, the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans or registration statements filed in connection with that certain
Registration Rights Agreement among the Company, Strong River and certain other
parties dated as of January 28, 1999, then the Company shall send to each Holder
of Registrable Securities written notice of such determination and, if within
fifteen (15) days after receipt of such notice, any such holder shall so request
in writing, the Company shall, subject to the provisions of this Section 6(d),
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered. Notwithstanding the foregoing,
the Company may abandon or delay any such registration at any time.
(ii) It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section
6(d) with respect to the Registrable
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Securities of any selling Holder, that such Holder shall furnish to the
Company such information regarding it, the Registrable Securities held by it,
and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities
and to execute such documents (including, without limitation, any
underwriting agreement) in connection with such registration as the Company
may reasonably request.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities; PROVIDED, HOWEVER, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 6:00 p.m. (New York City time) on a
Business Day, (iii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 6:00 p.m. (New York City time) on
any date and earlier than 11:59 p.m. (New York City time) on such date; or (iv)
upon receipt, when delivered by a reputable overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company: ThrustMaster, Inc.
7175 N.W. Evergreen Parkway #400
Hillsboro, Oregon 97124-5839
Facsimile: (503) 615-3297
Attention: Frank G. Hausmann, Jr., CEO
With copies to: Perkins Coie LLP
1211 SW Fifth Avenue, Suite 1500
Portland, OR 97204
Facsimile: (503) 727-2222
Attention: Patrick Simpson
If to Strong River: Strong River Investments Inc.
c/o Cavallo Capital Corp.
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<PAGE>
630 Fifth Avenue, Suite 2000
New York, New York 10111
Facsimile: (212) 332-3256
Attention: Avi Vigder
If to Bay Harbor: Bay Harbor Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Facsimile: (212) 332-3256
Attention: Avi Vigder
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile: (212) 541-4630
Attention: Kenneth L. Henderson
Each party shall provide five days' prior written notice to
the other party of any change in address or facsimile number.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company or such
other address as may be designated in writing
hereafter, in the same manner, by such Person.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
Holders of a majority of Registrable Securities then outstanding. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as
permitted under this Agreement and the Purchase Agreement.
(h) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a
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<PAGE>
reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee, and (b)
the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the
further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws,
(iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this Section, the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions of
this Agreement, (v) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement and (vi) at least 10,000
shares of Registrable Securities (appropriately adjusted for any stock
dividend, split or combination of the Common Stock) are being transferred to
such transferee or assignee in connection with such assignment of rights. The
rights to assignment shall apply to the Holders (and to subsequent)
successors and assigns.
(i) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(k) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or
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<PAGE>
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
(m) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
COMPANY:
THRUSTMASTER, INC.
By:________________________________
Name:
Title:
PURCHASERS:
STRONG RIVER INVESTMENTS, INC.
By:________________________________
Name:
Title:
BAY HARBOR INVESTMENTS, INC.
By:________________________________
Name:
Title:
<PAGE>
ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time sell any or all of their shares of
Common Stock on any stock exchange on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:
- - ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- - block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- - purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- - an exchange distribution in accordance with the rules of the
applicable exchange;
- - privately negotiated transactions;
- - short sales;
- - Broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- - a combination of any such methods of sale; and
- - any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under SEC Rule 144, if
available, rather than under this prospectus.
The Selling Stockholders may sell shares short, short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities, and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the Purchaser of shares, from the Purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
<PAGE>
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be Aunderwriters" within the
meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including reasonable fees and disbursements of
counsel to the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
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SCHEDULE 6(b)
