UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________ TO __________.
Commission File Number: 0-26516
EUPHONIX, INC.
(Exact name of registrant as specified in its charter)
California 77-0189481
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
220 Portage Avenue, Palo Alto, CA 94306
(Address of principal executive offices) (zip Code)
Registrant's telephone number, including area code: (650) 855-0400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 15,
1999 on the Nasdaq National Market, was approximately $8,568,432. Shares of
Common Stock held by each executive officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
<PAGE>
persons may under certain circumstances be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
The number of shares outstanding of the Registrant's Common Stock as of
March 15, 1999 was 7,956,521.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into
the part of this Form 10-K as indicated. None.
2
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The undersigned Registrant hereby amends and restates the following
items, financial statements, exhibits or other portions of its Annual Report on
Form 10-K for the year ended December 31, 1998 as set forth below:
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. List of Financial Statement Schedules
The following financial statements of Euphonix, Inc. are included in
Item 8:
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1998
Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended December 31, 1998
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1998
Notes to Consolidated Financial Statements
2. Supplemental Schedule
The following financial statement schedule of Euphonix, Inc. is filed
as part of this annual report, and should be read in conjunction with
the financial statements of Euphonix, Inc.:
Schedule II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
3
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<TABLE>
<CAPTION>
<S>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<C> <C> <C> <C>
Balance at Charged Balance
Beginning of to costs and at End of
Descriptions Period Expenses Deduction (1) Period
Year Ended December 31, 1996
Allowance for Doubtful Accounts $ 84,820 $ 34,919 $ -- $ 119,739
Accrued Warranty............... $171,398 $ 348,018 $ 136,701 $ 382,715
Year Ended December 31, 1997
Allowance for Doubtful Accounts $119,739 $ 103,054 $ -- $ 222,793
Accrued Warranty............... $382,715 $ 224,763 $ 259,628 $ 347,850
Year Ended December 31, 1998
Allowance for Doubtful Accounts $222,793 $ 180,489 $ 85,600 $ 403,282
Accrued Warranty................$347,850 $ 256,572 $ 165,025 $ 439,397
</TABLE>
(1) Charges for uncollectible accounts, net of recoveries
3. Exhibits.
Exhibit
Number Description of Document
------ -----------------------
3.1(1) Amended and Restated Articles of Incorporation of the
Registrant.
3.2(1) Bylaws of the Registrant.
10.1(1) Form of Indemnification Agreement between the
Registrant and each of its directors and
officers.
10.2(3) 1990 Stock Plan and forms of stock option
agreement and restricted stock purchase
agreement thereunder.
10.3 1995 Performance Based Stock Option Plan.
10.4 1995 New Director Option Plan.
10.5(4) 1997 Nonstatutory Stock Option Plan and form of stock
option agreement thereunder.
10.6(1) Modification Agreement dated November 6, 1991,
among the Registrant and certain shareholders of
the Registrant.
10.7(1) Credit Agreement dated September 30, 1994 between the
Registrant and Bank of the West, as amended.
10.8(1) Lease Agreement dated December 31, 1990, as
amended May 14, 1993, by and between the
Registrant and El Camino Center.
10.9(2) Agreement and Plan or Reorganization dated
January 15, 1996 by and among the Registrant,
Spectral, Incorporated, Euphonix Acquisition
Corporation and certain shareholders of
Spectral, Incorporated.
10.10 Common Stock Purchase Agreement dated March 16, 1998
between the Registrant
and the purchasers thereunder.
10.11 Common Stock Purchase Agreement dated January 26,
1999 between the Registrant, Dieter Meier and Stephen
D. Jackson.
4
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10.12 Registration Rights Agreement dated January 26, 1999
between the Registrant and the purchasers thereunder.
10.13* Secured Promissory Note dated April 23, 1999 between
the Registrant and the investors thereunder.
10.14(1) Form of Stock Option Agreement for use under 1995
Performance Based Stock Option Plan.
10.15(1) Form of Stock Option Agreement for use under 1995
New Director Option Plan.
23.1* Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (See page 66)
27.1* Financial Data Schedule
*Previously filed.
(1) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form SB-2 (File No. 33-94898-LA), effective
August 21, 1995.
(2) Incorporated by reference to the exhibit filed with the Registrant's current
report on Form 8-K dated February 7, 1996. (3) Incorporated by reference to
the exhibit filed with the Registrant's Registration Statement on Form S-8
(File No.333-17545) effective December 10, 1996.
(4) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-68425) effective December
4, 1998.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
See (a) above.
(d) Financial Statement Schedules.
See (a) above.
5
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Palo Alto, State of California, on this 6th day of May, 1999.
EUPHONIX, INC.
By:/s/ Barry L. Margerum
_______________________________________________
Barry L. Margerum
Chief Executive Officer, President and Director
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Form 10-K has been signed by the followoing persons in the capacities and on the
dates indicated:
Signatures Title Date
---------- ----- ----
* Chairman May 6, 1999
- ---------------------------
James Dobbie
/s/ Barry L. Margerum Chief Executive Officer, President, May 6, 1999
- --------------------------- Director (Principal Executive and
Barry L. Margerum Financial Officer
* Director, Senior Vice President May 6, 1999
- ---------------------------
Scott W. Silfvast
* Director May 6, 1999
- ---------------------------
Milton M.T. Chang, Ph.D.
* Director May 6, 1999
- ---------------------------
Robert F. Kuhling, Jr.
* Director May 6, 1999
- ---------------------------
B. Yeshwant Kamath
* Controller (Principal Accounting May 6, 1999
- --------------------------- Officer)
Harriet N. Dietz
*By:/s/ Barry L. Margerum
_____________________
Barry L. Margerum
Attorney-in-fact
6
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EXHIBIT 10.3
EUPHONIX, INC.
1995 PERFORMANCE BASED STOCK OPTION PLAN
(as amended and restated by the Board of Directors through October 3, 1996)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Consultants and
Directors of the Company and its Subsidiaries and to promote the success of the
Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Euphonix, Inc., a California corporation.
(g) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such entity.
(h) "Continuous Status as an Employee, Consultant or Director" means
that the employment relationship, consulting relationship or directorship with
the Company, any Parent, or Subsidiary, is not interrupted or terminated. Conti-
nuous Status as an Employee, Consultant or Director shall not be considered
interrupted in the case of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company,its
Parent, any Subsidiary, or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company. For purposes of Incen-
tive Stock Options, no such leave may exceed 90 days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract, including Company
policies. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 91st day of such leave any Incentive Stock
7
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Option held by the Optionee shall be treated for tax purposes as a Nonstatutory
Stock Option.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option.
(r) "Optionee" means an Employee, Consultant or Director who receives an
Option.
(s) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
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<PAGE>
(t) "Plan" means his 1995 Performance Based Stock Option Plan.
(u) "Section 16(b) " means Section 16(b) of the Exchange Act.
(v) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 12 of the Plan.
(w) "Subsidiary" means a "subsidiary corporation," whether now or here-
after existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 50,000 Shares of Common Stock. The shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exer-
cised in full, or is surrendered pursuant to an Option Exchange Program,
the unpurchased Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated);
provided, however, that Shares that have actually been issued under the Plan
shall not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if unvested Shares are repur-
chased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different bodies with respect to different groups of Optionees.
(ii) Section 162(m). To the extent that the Administrator deter-
mines it to be desirable to qualify Options granted hereunder as "performance-
based compensation" within the meaning of Section 162(m) of the Code, the Plan
shall be administered by a Committee of two or more "outside directors" with-
in the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which com-
mittee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant author-
9
<PAGE>
ities, including the approval, if required, of any stock exchange upon which
the Common Stock is listed, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in accor-
dance with Section 2(k) of the Plan;
(ii) to select the Employees, Consultants and Directors to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(e) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then cur-
rent Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option shall have declined since the date the Option was granted;
(ix) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined as of the date that the amount of tax to be
withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(x) to institute an Option Exchange Program; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
10
<PAGE>
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees,
Consultants and Directors. Incentive Stock Options may be granted only to
Employees. An Employee, Consultant or Director who has been granted an Option
may, if otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written or electronic
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares subject to an Optionee's Incentive
Stock Options granted by the Company, any Parent or Subsidiary, which become
exercisable for the first time during any calendar year (under all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with respect to
continuation of Optionee's employment relationship, consulting relationship or
directorship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment relationship,
consulting relationship or directorship at any time,with or without cause.
(d) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 20,000 Shares.
(ii) In connection with his or her initial employment, an Employee may be
granted Options to purchase up to an additional 10,000 Shares which shall
not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.
(iv) If an Option is cancelled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction des-
cribed in Section 11), the cancelled Option will be counted against the limit
set forth in subsection (i) above. For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the share-
holders of the Company as described in Section 17 of the Plan. It shall continue
in effect for a term of ten (10) years unless sooner terminated under Section
13 of the Plan.
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7. Term of Option. The term of each Option shall be the term stated in
the written or electronic option agreement; provided, however, that the term
shall be no more than ten (10) years from the date of grant thereof. However,
in the case of an Incentive Stock Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%)of
the voting power of all classes of stock of the Company or any Parent or Sub-
sidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in the preceding paragraph, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option granted to
any person, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon exer-
cise of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be deter-
mined at the time of grant) and may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) other Shares which (x) in the case of Shares acquired upon
exercise of an Option have been owned by the Optionee for more than six
months on the date of surrender and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, (5) delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment.
In making its determination as to the type of consideration to accept, The
Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
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9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written or
electronic notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment Relationship, Consulting
Relationship or Directorship. In the event of termination of an Optionee's
Continuous Status as an Employee, Consultant or Director with the Company (but
not in the event of an Optionee's change of status from Employee to Consultant
or Director (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day from the date of such change of status), from Consultant to
Employee or Director or from Director to Employee or Consultant), such Optionee
may, but only within such period of time as is determined by the Administrator,
of at least thirty (30) days, with such determination in the case of an
Incentive Stock Option not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee, Consultant or Director as a result of
his or her disability, Optionee may, but only within twelve (12) months from
the date of such termination (and in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
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Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the day three months and one day following
such termination. To the extent that Optionee is not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by
the unexercisable portion of the Option shall immediately revert to the Plan.
If, after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Unless determined otherwise by the
Administrator, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no Op-
tions have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportion-
ately adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities con-
vertible into shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option.
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(b) Dissolution or Liquidation. In the event of the proposed disso-
lution or liquidation of the Company, the Board shall notify the Optionee at
least fifteen (15) days prior to such proposed action. The Administrator
may, in its discretion, provide for the Optionee to have the right to exercise
his or her Option as to all of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable. To the extent it has not been
previously exercised, the Option will terminate immediately prior to the con-
summation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent Option shall
be substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent Option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Board may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
12. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the deter-
mination granting such Option, or such other date as is determined by the
Board. Notice of the determination shall be given to each Employee, Consultant
or Director to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable law or
regulation, the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
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(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability
of the Company to obtain authority from any regulatory body having juris-
diction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the Com-
pany of any liability in respect of the failure to issue or sell such Shares as
to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written or electronic
agreements in such form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
18. Information to Optionees. The Company shall provide to each
Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
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EXHIBIT 10.4
EUPHONIX, INC.
1995 NEW DIRECTOR OPTION PLAN
(as amended and restated by the Board of Directors through October 3, 1996)
1. Purposes of the Plan. The purposes of this 1995 New Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Euphonix, Inc., a California corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and Directors, emp-
loyed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in
and of itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934,as amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated Quota-
tion ("NASDAQ") System, the Fair Market Value of a Share of Common Stock shall
be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock)on the date of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share of
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Common Stock shall be the mean between the high bid and low asked prices for
the Common Stock on the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(i) "Option" means a stock option granted pursuant to the Plan.
(j) "Optioned Stock" means the Common Stock subject to an Option.
(k) "Optionee" means a Director who holds an Option.
(l) "Outside Director" means a Director (a) who is not an Employee and
(b) first elected to the Board after the effective date of the Plan.
(m) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(n) "Plan" means this 1995 New Director Option Plan.
(o) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(p) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 50,000 Shares of Common Stock (the "Pool"). The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be made in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option
to purchase 10,000 Shares (the "First Option") on the date on which such person
18
<PAGE>
first becomes an Outside Director, whether through election by the shareholders
of the Company or appointment by the Board to fill a vacancy.
(iii) Each Outside Director shall be automatically granted an Option
to purchase 2,000 Shares (an "Annual Option") on the date of each annual
meeting of shareholders of the Company, provided he or she is an Outside
Director as of the date of such meeting and is reelected to, or remains a
member of, the Board at such meeting.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option made before the Company has obtained share-
holder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of each First Option and Annual Option granted
hereunder shall be as follows:
(A) the term of the Option shall be ten (10) years.
(B) the Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Sections
8 and 10 hereof.
(C) the exercise price per Share shall be equal to the Fair
Market Value per Share on the date of grant of the Option. In the event
that the date of grant of the Option is not a trading day, the exercise price
per Share shall be the Fair Market Value on the next trading day immediately
following the date of grant of the Option.
(D) subject to Section 10 hereof, the Option shall become
exercisable as to twenty-five percent (25%) of the Shares subject to the Option
on each anniversary of its date of grant, provided that the Optionee continues
to serve as a Director on such dates.
(vi) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors, pro rata, based on the number of shares set to be
granted to each Outside Director pursuant to Sections 4(a)(ii) and 4(a)(iii)
above. No further grants shall be made until such time, if any, as additional
Shares become available for grant under the Plan through action of the Board
or the shareholders to increase the number of Shares which may be issued under
the Plan or through cancellation or expiration of Options previously granted
hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
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6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until share-
holder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
20
<PAGE>
and only to the extent that the Optionee was entitled to exercise it on the
date of such termination (but in no event later than the expiration of its
ten (10) year term). To the extent that the Optionee was not entitled to exer-
cise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option may be assumed or an
equivalent option may be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. If such successor corporation assumes
or substitutes an equivalent option for the Option, the Option or equivalent
option shall continue to become exercisable as provided in Section 4 hereof for
so long as Optionee remains a Director or the Optionee serves as a director of
the successor corporation or a Parent or Subsidiary of the successor
corporation. Upon the Optionee's termination of status as a Director of the
Company or of the successor (or Parent or Subsidiary thereof), as applicable,
Optionee's outstanding Option(s) shall become fully exercisable, including as to
Shares as to which such Option(s) would not otherwise be exercisable, and shall
remain exercisable in accordance with Sections 8(b) through (d) above.
In the event that the successor corporation does not agree to assume
the Option or to substitute an equivalent option, each outstanding Option shall
become fully vested and exercisable, including as to Shares as to which it would
not otherwise be exercisable. If an Option becomes fully vested and exercisable
in the event of a merger or sale of assets, the Board shall notify the Optionee
that the Option shall be fully exercisable for a period of thirty (30) days from
the date of such notice, and the Option shall terminate upon the expiration of
such period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section
4, the Board may at any time amend, alter, suspend, or discontinue the Plan, but
no amendment, alteration, suspension, or discontinuation shall be made which
would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and desirable
to comply with any other applicable law or regulation, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
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13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company following the adoption of this Plan
by the Board. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law.
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EXHIBIT 10.10
COMMON STOCK PURCHASE AGREEMENT
AMONG
EUPHONIX, INC.
AND
THE PURCHASERS
March 16, 1998
24
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TABLE OF CONTENTS
Page
----
Section 1 PURCHASE AND SALE.................................................27
1.1 Authorization.............................................27
1.2 Purchase and Sale of Shares...............................27
1.3 The Closing...............................................27
1.4 Purchase Price............................................27
1.5 Delivery..................................................27
Section 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................28
2.1 Corporate Existence and Power.............................28
2.2 Authorization; No Restrictions............................28
2.3 Capital Stock.............................................29
2.4 Offering..................................................29
2.5 Brokers or Finders........................................29
2.6 Disclosure................................................29
Section 3 REPRESENTATIONS AND WARRANTIES OF PURCHASERS......................30
3.1 Accredited Investor; Experience...........................30
3.2 Investment................................................30
3.3 Rule 144..................................................30
3.4 Authorization.............................................30
3.5 Brokers or Finders........................................30
3.6 Tax Liability.............................................30
3.7 Restrictions on Transfer; Legend..........................30
Section 4 CONDITIONS PRECEDENT TO OBLIGATIONS...............................31
4.1 Conditions to the Purchasers' Obligations.................31
4.2 Conditions to the Company's Obligations...................32
Section 5 COVENANTS OF THE COMPANY..........................................33
5.1 Certain Definitions.......................................33
5.2 Request for Registration..................................34
5.3 Expenses of Registration..................................34
5.4 Indemnification...........................................34
5.5 Information by Holder.....................................37
5.6 Rule 144 Reporting........................................37
5.7 Transfer of Registration Rights...........................37
Section 6 MISCELLANEOUS.....................................................38
25
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TABLE OF CONTENTS
(Continued)
Page
----
6.1 Confidentiality...........................................38
6.2 Notices...................................................38
6.3 Entire Agreement..........................................39
6.4 Partial Invalidity........................................39
6.5 No Waiver.................................................39
6.6 Successors and Assigns....................................39
6.7 Announcements.............................................39
6.8 Expenses..................................................39
6.9 Headings..................................................40
6.10 Cooperation...............................................40
6.11 Governing Law.............................................40
6.12 Finders Fees..............................................40
6.13 California Corporate Securities Law.......................40
6.14 Counterparts..............................................40
6.15 Survival..................................................40
26
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COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), is made as of
March 16, 1998 by and among EUPHONIX, INC., a California corporation (the
"Company"), and the persons and entities listed on the Schedule of Purchasers
attached as Exhibit A (the "Purchasers").
Section 1
PURCHASE AND SALE
1.1 Authorization. The Company has authorized the sale of up to a number
of shares(the "Shares")of Common Stock of the Company,$0.001 par value ("Common
Stock"), which shall have an aggregate market value equal to $1,949,998, based
upon a purchase price per share equal to the closing price of the Common Stock
(determined by reference to the day's last trade price as reported by NASDAQ) on
the date of the execution of this Agreement ($1.875) (the "Market Price"),
subject to satisfaction or waiver of the conditions set forth in Section 4.
1.2 Purchase and Sale of Shares. Subject to the terms and conditions
of this Agreement, the Company shall sell, assign, convey, transfer and deliver
to the Purchasers, and the Purchasers shall on the Closing Date (defined in Sec-
tion 1.3), purchase and acquire from the Company the number of shares of Common
Stock set forth in column 2 opposite the Purchaser's name on the Schedule of
Purchasers, at a purchase price per share equal to the Market Price, for an
aggregate purchase price as set forth in column 3 opposite the Purchaser's name
on the Schedule of the Purchasers (the "Purchase Price"). The Company's
agreement with each Purchaser is a separate agreement, and the sale of the
Shares to each Purchaser is a separate sale.
1.3 The Closing. The closing (the "Closing") of the purchase and sale of
the Shares under Section 1.2 shall, subject to the satisfaction or waiver of all
conditions precedent set forth in Section 4 and payment of the Purchase Price,
occur on March 20, 1998 or as otherwise mutually agreed to by the parties
(the "Closing Date") at 11:00 a.m. at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Place, Palo Alto, California 94304-1050.
1.4 Purchase Price. Payment of the Purchase Price shall be in U.S. dollars
and shall be made in cash or by certified check made payable to the Company or
by wire transfer of immediately available funds to an account or accounts of the
Company at a bank or banks specified by the Company.
1.5 Delivery. On the Closing Date, the Company shall deliver to the Pur-
chasers the stock certificates representing the number of Shares purchased as
set forth in column 2 of the Schedule of Purchasers, registered in the
name of the Purchasers, in exchange for the Purchase Price.
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Section 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In connection with the sale of the Shares, the Company represents and
warrants to the Purchasers as of the date of this Agreement as follows:
2.1 Corporate Existence and Power. The Company is a corporation duly
organized and validly existing under the laws of the State of California. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
is duly qualified and authorized to do business in each jurisdiction where the
conduct of its business or the ownership of its properties or assets requires
such qualification (except where failure to qualify would not have a material
adverse effect on the Company's business or financial condition).
2.2 Authorization; No Restrictions.
(a) The execution, delivery and performance of this Agreement
by the Company has been duly authorized by all necessary corporate action.
This Agreement has been duly executed by the Company and constitutes a valid
and legally binding obligation of the Company enforceable against it in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors rights generally and
principles of equity relating to specific performance, injunctive relief or
other equitable remedies and limitations of public policy. The Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable. The Shares will be free of any liens or
encumbrances, other than liens or encumbrances created by or imposed upon the
Shares by the Purchasers; provided, however, that the Shares are subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein.
(b) The Company has obtained all necessary authorizations,
consents and approvals, governmental and otherwise, required for the execution
and delivery of this Agreement and performance of its obligations hereunder,
other than such filings as may be necessary to qualify (or secure an exemption
from qualification if available) under other applicable state and federal
securities laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
(c) The execution, delivery and performance of this Agreement by
the Company in accordance with its terms will not, with or without the giving
of notice or the passage of time, or both, conflict with, result in a default,
right to accelerate or loss of rights under, or result in the creation of any
encumbrance, or require the consent of any third party or U.S. governmental
authority pursuant to (i) any provisions of the Amended and Restated Articles of
Incorporation (the "Restated Articles") or Restated Bylaws of the Company or
(ii) any franchise, mortgage, indenture or deed of trust or any lease,
license or other agreement or any law, rule, regulation, order, judgment or
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decree to which the Company is a party or by which the Company (or any of the
Company's assets, properties, operations or business) is bound, which default,
right to accelerate, loss of rights under or creation of an encumbrance, or
failure to obtain such consent would have a material adverse effect on the Com-
pany's business or financial condition.
2.3 Capital Stock. The authorized, issued and outstanding capital
stock of the Company as of the date of this Agreement is 20,000,000 shares of
Common Stock and 2,000,000 shares of preferred stock, par value $0.001 (the
"Preferred Stock"). As of January 30, 1998, there were 5,590,492 shares of Com-
mon Stock issued and outstanding, and there were no issued and outstanding
shares of Preferred Stock. All issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and nonassess-
able. The Common Stock and Preferred Stock have the rights, preferences,
privileges and restrictions as set forth in the Restated Articles. The Com-
pany has reserved 2,042,281 shares of Common Stock for issuance under the Com-
pany's 1990 Stock Option Plan, 50,000 shares for issuance under the 1995 Per-
formance Based Stock Option Plan, 50,000 shares for issuance under the New
Director's Option Plan and 750,000 shares for issuance under the 1997 Nonsta-
tutory Stock Option Plan (together with the 1990 Stock Option Plan, the
1995 Performance Based Stock Option Plan and the New Director's Option Plan,
the "Stock Plans"). Except for such shares of Common Stock reserved for issuance
under the Company Stock Plans, there are no outstanding options, warrants,
rights (including conversion and preemptive rights or rights of first refusal)
or other agreements to issue or purchase any shares of Common Stock or Preferred
Stock of the Company.
2.4 Offering. Subject to the accuracy of each Purchaser's
representations in Section 3 hereof, the offer, sale and issuance of the Shares
to be issued in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
2.5 Brokers or Finders. The Company has not engaged any brokers,
finders or agents, and no Purchasers have incurred, and will not incur, directly
or indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreement. In the event that the preceding sentence is in
any way inaccurate, the Company agrees to indemnify and hold harmless each
Purchaser from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such liability)
for which such Purchaser, or any of his officers, directors, employees or
representatives, is responsible.
2.6 Disclosure. The Company's reports, registration statements, proxy
statements and other materials, together with any amendments thereto, required
to be filed by the Company with the Securities and Exchange Commission ("SEC")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since August 22, 1995 (the "SEC Reports") do not, as of the date filed, contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The financial statements contained in the SEC
Reports fairly present the financial position of the Company as of the dates
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<PAGE>
thereof and for the periods covered thereby and have been prepared in accordance
with generally accepted accounting principles and with the published rules and
regulations of the SEC with respect thereto.
Section 3
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Shares as follows:
3.1 Accredited Investor; Experience. The Purchaser is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. The Purchaser has substantial experience in evaluating
and investing in private placement transactions of securities in companies
similar to the Company so that he is capable of evaluating the merits and risks
of his investment in the Company and has the capacity to protect his own
interests. The Purchaser has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and has
also had an opportunity to ask questions of the Company's officers, which
questions were answered to his satisfaction. The Purchaser understands that such
discussions, as well as any written information issued by the Company, were
intended to describe certain aspects of the Company's business and prospects but
were not a thorough or exhaustive description. The foregoing, however, does not
limit or modify the representations and warranties in Section 2 or the right of
the Purchaser to rely thereon.
3.2 Investment. The Purchaser is acquiring the Shares for investment
for the Purchaser's own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. The
Purchaser understands that the Shares to be purchased have not been, and will
not be, registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
3.3 Rule 144. The Purchaser acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from such registration is available. Moreover, the Purchaser
understands that, except as otherwise set forth herein, the Company is under no
obligation to register the Shares. The Purchaser is aware of the provisions of
Rule 144 promulgated under the Securities Act which permit limited resale of
shares purchased in a private placement without registration under the
Securities Act subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares and the
availability of certain current public information about the Company.
3.4 Authorization. This Agreement, when executed and delivered by the
Purchaser, will constitute the valid and legally binding obligations of the
Purchaser, enforceable in accordance with its terms and subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.5 Brokers or Finders. The Purchaser has not engaged any brokers,
finders, or agents, and the Company has not incurred, and will not incur,
directly or indirectly, as a result of any action taken by the Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement and the transactions contemplated
hereby. In the event that the preceding sentence is in any way inaccurate, the
Purchaser agrees to indemnify and hold harmless the Company from any liability
for any commission or compensation in the nature of a finder's fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company, or any of its officers, directors, employees or
representatives, is responsible.
3.6 Tax Liability. The Purchaser has reviewed with his own tax advisers
the federal, state and local tax consequences of this investment and the
transactions contemplated by this Agreement and has relied solely on such
advisers and not on any statements or representations of the Company or any of
its agents. The Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
3.7 Restrictions on Transfer; Legend.
(a) Prior to any proposed sale, assignment, transfer or pledge of any
Shares (other than a transfer not involving a change in beneficial ownership),
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of the holder's intention to effect such transfer, sale, assignment
or pledge. Each notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied by a written opinion of legal counsel reasonably satisfactory to the
Company addressed to the Company to the effect that the proposed transfer of the
Shares may be effected without registration under the Securities Act. Each
certificate evidencing the Shares transferred as above provided shall bear the
appropriate restrictive legend set forth in Section 3.7(b) below, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such holder and in the reasonable opinion of the Company such legend
is not required in order to establish compliance with any provision of the
Securities Act.
(b) Each certificate representing the Shares shall be endorsed with
the following legends and any other legends required by law:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
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(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
Section 4
CONDITIONS PRECEDENT TO OBLIGATIONS
4.1 Conditions to the Purchasers' Obligations. The obligation of the
Purchasers to purchase the Shares at the Closing shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions
(any of which may be waived by the Purchasers):
(a) Representations, Warranties and Covenants of the Company. The
Company shall have complied in all material respects with all of its agree-
ments and covenants contained herein to be performed at or prior to the
Closing Date, and all the representations and warranties of the Company
contained herein shall be true in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
except as otherwise contemplated hereby.
(b) No Prohibition. No statute, rule or regulation or orderof any court
or administrative agency shall be in effect which restrains or prohibits the
Purchasers from consummating the transactions contemplated hereby. The Company
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<PAGE>
shall have obtained all necessary Blue Sky law permits and qualifications, or
have the availability of exemption therefrom, required by any state for the
offer and sale of the Shares.
(c) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated on the Closing Date and all
documents and instruments incident to such transactions shall have been reason-
ably approved by each of the Purchasers (or his counsel).
4.2 Conditions to the Company's Obligations. The obligations of the
Company to sell the Shares at the Closing shall be subject to the satisfaction
on or prior to the Closing Date of all of the following conditions (any of which
may be waived by the Company): (a) Representations, Warranties and Covenants of
the Purchasers. The Purchasers shall have complied in all material respects
with all of their agreements and covenants contained herein to be performed at
or prior to the Closing Date, and all of the representations and warranties of
the Purchasers contained herein shall be true in all material respects on and as
of the Closing Date with the same effect as though made on and as of the Closing
Date.
(b) No Prohibition. No statute, rule or regulation or order of any
court or administrative agency shall be in effect which restrains or prohibits
the Company from consummating the transactions contemplated hereby. The Company
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<PAGE>
shall have obtained all necessary Blue Sky law permits and qualifications, or
have the availability of exemption therefrom, required by any state for the
offer and sale of the Shares.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated on the Closing Date and all docu-
ments and instrument incident to such transactions shall have been reasonably
approved by the Company and its counsel.
Section 5
COVENANTS OF THE COMPANY
5.1 Certain Definitions. As used in this Section, the following terms
shall have the following respective meanings:
"Commision" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock of the Company, par
value $0.001 per share.
"Holder" shall mean (i) any Common Purchaser holding
Registrable Securities and (ii) any person holding Registrable Securities to
whom the rights under this Section 5 have been transferred in accordance with
Section 5.7 hereof.
"Initiating Holders" shall mean Holders or transferees of any
Holders under Section 5.7 hereof who in the aggregate are Holders of greater
than 50% of the Registrable Securities.
"Registrable Securities" means (i) the Common Stock issued
pursuant to this Agreement and (ii) any Common Stock of the Company issued or
issuable in respect of such Common Stock upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issuable with
respect to such Common Stock; provided, however, that shares of Common Stock, or
other securities shall only be treated as Registrable Securities if and so long
as they have not been (A) sold to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, whether in a
registered offering, Rule 144 or otherwise, or (B) sold or are, in the opinion
of counsel for the Company, available for sale in a single transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto
may be removed upon the request of the Holder.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
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"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 5
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all reasonable fees and disbursements of counsel
for any Holder.
5.2 Request for Registration. The Company covenants that upon receipt
of a written request from the Initiating Holders, it will file and use its
reasonable commercial efforts to make effective as soon as possible a "shelf"
S-1 registration statement (or if the Company qualifies or receives a waiver, an
S-3 registration statement ) with respect to the Registrable Securities. The
Company further covenants and agrees to keep such registration effective (and to
the extent necessary under applicable law, update such registration statement)
for a period of two (2) years from the Closing Date.
Notwithstanding the foregoing, the Company shall not be obligated to
file such registration statement in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
Notwithstanding the foregoing, the Company shall not be obligated to
make such registration statement go effective prior to six (6) months after the
Closing Date;
The rights under this Section 5.2 shall terminate two (2) years after
the Closing Date.
5.3 Expenses of Registration. All Registration Expenses incurred in
connection with the above registration shall be borne by the Company. All
Selling Expenses relating to securities registered on behalf of the Holders.
5.4 Indemnification.
(a) The Company will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, with respect to which registra-
tion, qualification or compliance has been effected pursuant to this Section
5, against all expenses, claims, losses, damages or liabilities (or actions in
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<PAGE>
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any reg-
istration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration, qualifica-
tion or compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act, the
Exchange Act, state securities law or any rule or regulation promulgated under
such laws applicable to the Company in connection with any such registration,
qualification or compliance, and within a reasonable period the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, for any legal and any other expenses reasonably incur-
red in connection with investigating, preparing or defending any such claim,
loss, damage, liability or action; provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Company by an instrument duly exe-
cuted by such Holder or controlling person and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in thesecurities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company within the
meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and within a reasonable period will reimburse the Company, such
Holders, such directors, officers, persons, or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding the above, the liability of each Holder under this subsection
(b) shall not exceed such Holder's net proceeds from the sale of securities
pursuant to such registration statement.
(c) Each party entitled to indemnification under this Section 5.4
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim of the
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<PAGE>
defense of such claim or litigation, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section 5
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
the Indemnifying Party shall not assume the defense for matters as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. No
Indemnifying Party shall be liable for indemnification hereunder with respect to
any settlement or consent to judgment, in connection with any claim or
litigation to which these indemnification provisions apply, that has been
entered into without the prior consent of the Indemnifying Party (which consent
will not be unreasonably withheld).
5.5 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 5.
5.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
during which the Company is subject to the reporting requirements of the
Securities Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) So long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule
144, and of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and docu-
ments of the Company and other related information in the possession of or
reasonably obtainable by the Company.
5.7 Transfer of Registration Rights. The rights to cause the Company to
register securities granted Holders under Section 5 may be assigned to a
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transferee or assignee reasonably acceptable to the Company (which consent shall
not be unreasonably withheld) in connection with indemnifying Party, who shall
conduct any transfer or assignment of Registrable Securities by a Holder,
provided that (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) such assignee or transferee acquires at
least 20,000 shares of Registrable Securities (adjusted for stock splits, stock
dividends, stock recombinations and the like after the date of this Agreement).
Notwithstanding the above, the rights to cause the Company to register
securities may be assigned to any partner, shareholder, equity holder or officer
of a Holder without compliance with item (ii) above, provided written notice
thereof is promptly given to the Company.
Section 6
MISCELLANEOUS
6.1 Confidentiality. The Purchasers shall not, at any time, disclose to
any third party any confidential information or trade secret of the Company, any
client or customer of the Company (other than as may be required by law or in
the normal course of business), or utilize such confidential information or
trade secret for their own benefit, or for the benefit of any third party. The
term "confidential information or trade secret" shall not include any
information which is or shall become generally available to the public other
than by breach of this provision.
6.2 Notices. All notices and other communications required or permitted
to be given under any provision of this Agreement shall be in writing and shall
be deemed given when delivered (i) by hand, (ii) by Express Mail, Federal
Express or other overnight express delivery service (receipt requested), or
(iii) by telecopy (receipt confirmed), as follows:
(a) If to the Purchaser, addressed to the Purchaser at the address set
forth on the Schedule of Purchasers or at such other address as the Purchaser
has furnished to the Company in writing.
(b) If to the Company, addressed to the Company at
Euphonix, Inc.
220 Portage Avenue
Palo Alto, CA 94306
Attention: President and Chief Executive Officer
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: John V. Roos, Esq.
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Any party may change its address for the purpose of this Agreement by
notice to the other parties given as set forth above. Any such notice shall be
deemed to have been given (i) upon delivery, if personally delivered or sent by
overnight courier and (ii) on the first business day following telecopy, if
telecopied.
6.3 Entire Agreement. This writing constitutes the entire agreement of
the parties with respect to the subject matter hereof, and supersedes any prior
written or oral understandings or agreements among the parties regarding the
subject matter hereof. Neither this Agreement nor any term hereof may be
modified, amended, waived or terminated except by a written instrument
specifically referring to this Agreement signed by the Company and each of the
Purchasers.
6.4 Partial Invalidity. If any provision of this Agreement is for any
reason held to be invalid, prohibited or unenforceable in any jurisdiction by a
court of competent jurisdiction, such provision, as to such jurisdiction, shall
be ineffective to the extent of such invalidity, prohibition or
unenforceability, without invalidating the remaining portion of such provision
or the other provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction; provided that no
such severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
6.5 No Waiver. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default previously or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
6.6 Successors and Assigns. Except as otherwise provided herein, the
provisions of this Agreement shall insure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties; provided, however, that the rights of each Purchaser to purchase the
Shares shall not be assignable without the consent of the Company.
6.7 Announcements. The Purchasers agree not to make any public
announcement with respect to this Agreement and the transactions contemplated by
this Agreement without the prior approval of the Company.
6.8 Expenses. Each party to this Agreement shall pay its own expenses
and costs incurred by it in connection with the negotiation and consummation of
this Agreement.
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6.9 Headings. The article and section headings contained herein are for
the purpose of convenience only and are not intended to define or limit the
contents of said articles or sections.
6.10 Cooperation. Each party hereto shall cooperate, shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by the other party in order to carry out the provisions and
purposes of this Agreement.
6.11 Governing Law. This Agreement and all amendments thereof shall, in
all respects, be governed by and construed and enforced in accordance with the
internal laws (without regard to principles of conflicts of law) of the State of
California.
6.12 Finders Fees. The Company will indemnify the Purchasers, and the
Purchasers will indemnify the Company, against all liabilities incurred by the
indemnifying party or parties with respect to claims related to investment
banking or finders fees in connection with the transactions contemplated by this
Agreement, arising out of arrangements between the party asserting such claims
and the indemnifying party or parties, and all costs and expenses (including
reasonable fees of counsel) of investigating and defending such claims.
6.13 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
be deemed one instrument.
6.15 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any of the
Purchasers and the closing of the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
EUPHONIX, INC.
By: /s/ Barry L. Margerum
_____________________
Barry L. Margerum
Title: Chief Executive Officer and President
PURCHASERS:
ONSET Enterprise Associates
By: /s/ Robert F. Kuhling, Jr.
_________________________
Name: Robert F. Kuhling, Jr.
Title: General Partner,
OEA Management, L.P.
The General Partner of
ONSET Enterprise Associates, L.P.
Linda Wei-Lee Chang 1998 Trust:
By: /s/ Michael Minhall Chang
_________________________
Michael Minhall Chang, Trustee
By: /s/ Linda Wei-Lee Chang
_______________________
Linda Wei-Lee Chang, Trustee
Michael Minhall Chang 1998 Trust:
By: /s/ Linda Wei-Lee Chang
_______________________
Linda Wei-Lee Chang, Trustee
By: /s/ Michael Minhall Chang
_________________________
Michael Minhall Chang, Trustee
/s/ Milton Chang
________________
Milton Chang
/s/ Scott Silfvast
__________________
Scott Silfvast
/s/ Amy Silfvast
________________
Amy Silfvast
41
<PAGE>
<TABLE>
<CAPTION>
<S>
EXHIBIT A
_________
SCHEDULE OF PURCHASERS
______________________
<C> <C> <C>
Purchaser Name and Address No. Shares Purchased Purchase Price
__________________________ ____________________ ______________
ONSET Enterprise Associates 800,000 $ 1,500,000
Milton Chang 80,000 $ 150,000
Linda Wei-Lee Chang 1998 Trust 53,333 $ 99,999.38
Michael Minhall Chang 1998 Trust 53,333 $ 99,999.38
Scott Silfvast and Amy Silfvast 53,333 $ 99,999.38
</TABLE>
42
<PAGE>
EXHIBIT 10.11
EUPHONIX, INC.
220 Portage Avenue
Palo Alto, California 94306
COMMON STOCK PURCHASE AGREEMENT
January 26, 1999
43
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1 Authorization and Sale of Common Stock............................46
1.1 Authorization.............................................46
1.2 Sale of Shares............................................46
Section 2 Closing Date; Delivery............................................46
2.1 Closing...................................................46
2.2 Delivery..................................................46
Section 3 Representations and Warranties of the Company.....................47
3.1 Organization and Standing.................................47
3.2 Corporate Power...........................................47
3.3 Capitalization............................................47
3.4 Authorization.............................................48
3.5 Financial Statements......................................48
3.6 No Material Adverse Change................................48
3.7 No Undisclosed Liabilities................................48
3.8 Title to Assets...........................................49
3.9 Actions Pending...........................................49
3.10 Compliance with Law.......................................49
3.11 Certain Fees..............................................49
3.12 Disclosure................................................49
3.13 Material Agreements.......................................49
3.14 Employees.................................................50
3.15 Intellectual Property, Trademarks, etc....................50
Section 4 Representations and Warranties of the Purchasers..................50
4.1 Experience; Speculative Nature of Investment..............50
4.2 Investment................................................50
4.3 Rule 144..................................................50
4.4 Access to Data............................................51
4.5 Authorization.............................................51
4.6 Brokers or Finders........................................51
4.7 Tax Liability.............................................51
44
<PAGE>
TABLE OF CONTENTS
(continued)
4.8 Recent Transfers..........................................51
Section 5 Conditions to Purchasers'Obligations to Close.....................52
5.1 Representations and Warranties Correct....................52
5.2 Covenants.................................................52
5.3 Blue Sky..................................................52
5.4 Rights Agreement..........................................52
5.5 Compliance Certificate....................................52
5.6 Compliance with Law.......................................52
5.7 Opinion of Company's Counsel..............................52
Section 6 Conditions to Company's Obligations to Close......................52
6.1 Representations...........................................52
6.2 Covenants.................................................52
6.3 Blue Sky..................................................53
6.4 Rights Agreement..........................................53
6.5 Compliance with Law.......................................53
Section 7 Covenants of the Company..........................................53
7.1 Board of Directors........................................53
Section 8 Miscellaneous.....................................................53
8.1 Governing Law.............................................53
8.2 Survival..................................................53
8.3 Successors and Assigns....................................53
8.4 Entire Agreement; Amendment...............................53
8.5 Notices, etc..............................................54
8.6 Delays or Omissions.......................................54
8.7 California Corporate Securities Law.......................54
8.8 Counterparts..............................................55
8.9 Severability..............................................55
8.10 Titles and Subtitles......................................55
8.11 Expenses..................................................55
8.12 Limitation on Liability...................................55
8.13 Attorney's Fees...........................................55
45
<PAGE>
EUPHONIX, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
January 26, 1999 by and among Euphonix, Inc., a California corporation (the
"Company"), and the individuals on the Schedule of Purchasers attached as
Exhibit A hereto (the "Purchasers").
Section 1
Authorization and Sale of Common Stock
1.1 Authorization. The Company will, prior to the Closing (as
defined below), authorize the sale and issuance of up to 1,320,446 shares (the
"Shares") of the Company's Common Stock ("Common Stock").
1.2 Sale of Shares. Subject to the terms and conditions of
this Agreement, each Purchaser agrees to purchase and the Company agrees to sell
and issue to each Purchaser the number of Shares set forth opposite his name on
the Schedule of Purchasers, at a cash price per share equal to 90% of the
average closing bid price per share for the ten days immediately preceding the
Closing Date (as defined below). The Company's agreement with each Purchaser is
a separate agreement, and the sale of the Shares to each Purchaser is a separate
sale.
Section 2
Closing Date; Delivery
2.1 Closing. The purchase and sale of the Shares hereunder
shall take place at one closing ("the Closing") on January 26, 1999, (the
"Closing Date"). The Closing shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, at 9:00 a.m. local
time, on the Closing Date, or at such other time and place upon which the
Company and the Purchaser shall agree.
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser a certificate registered in each Purchaser's name representing the
number of Shares that each Purchaser is purchasing for payment of the purchase
price therefor as set forth in Section 1.2 above, by check payable to the
Company or wire transfer per the Company's instructions.
46
<PAGE>
Section 3
Representations and Warranties of the Company
Except as set forth in writing in the disclosure letter supplied by the
Company to the Purchaser (the "Disclosure Letter") the Company represents and
warrants to the Purchasers as of the date of this Agreement as follows:
3.1 Organization and Standing. The Company is a corporation
duly organized and existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Company has requisite
corporate power and authority to own and operate its properties and assets, and
to carry on its business. The Company is presently qualified to do business as a
foreign corporation in each jurisdiction where the failure to be so qualified
would have a material adverse effect on the Company's business.
3.2 Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement and that
certain Registration Rights Agreement substantially in the form attached hereto
as Exhibit B (the "Rights Agreement"), to sell and issue the Shares hereunder,
and to carry out and perform its obligations under the terms of this Agreement
and the Rights Agreement (together the "Agreements").
3.3 Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the date hereof are
set forth in the Disclosure Letter. All of the outstanding shares of the
Company's Common Stock have been duly and validly authorized. Except as set
forth in this Agreement and the Rights Agreement and as set forth in the
Company's most recent Form 10-K, including the accompanying financial statements
("Form 10-K"), or in the Company's most recent Form 10-Q ("Form 10-Q"), filed
with the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") in other public
filings made by the Company with the Commission pursuant to the Exchange Act
(collectively, the "Commission Filings"), or the Disclosure Letter, no shares of
Common Stock are entitled to preemptive rights or registration rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and the Rights Agreement and as set forth
in the Commission Filings, or the Disclosure Letter, there are no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. Except for registration rights contained in agreements entered into by
the Company in order to sell restricted securities as provided in the Commission
Filings or the Disclosure Letter, the Company is not a party to any agreement
granting registration rights to any person with respect to any of its equity or
debt securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. Except as set forth in the Commission Filings or in the
Disclosure Letter, the offer and sale of all capital stock, convertible
47
<PAGE>
securities, rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable federal and state securities laws, and no
stockholder has a right of rescission or damages with respect thereto which
would have a material adverse effect on the Company's financial condition or
operating results.
3.4 Authorization. All corporate action on the part of the
Company and its directors necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Shares, and the performance of all of the Company's
obligations under the Agreements has been taken or will be taken prior to the
Closing. The Agreements, when executed and delivered by the Company, shall
constitute valid and binding obligations of the Company, enforceable in
accordance with their terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, except that
the indemnification provisions of Section 1.9 of the Rights Agreement may
further be limited by principles of public policy. The Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, will
be fully paid and nonassessable, and will be free of any liens or encumbrances,
other than any liens or encumbrances created by the Purchaser; provided,
however, that the Shares are subject to restrictions on transfer under state
and/or federal securities laws as set forth herein and in the Rights Agreement.
3.5 Financial Statements. The financial statements of the
Company included in the Commission Filings comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.6 No Material Adverse Change. Since September 30, 1998, the
date through which the most recent quarterly report of the Company on Form 10-Q
has been prepared and filed with the Commission, the Company has not experienced
or suffered any event or condition which has materially affected the business
operations, assets or financial condition of the Company.
3.7 No Undisclosed Liabilities. Except as disclosed in the
Commission Filings or the Disclosure Letter, the Company has no liabilities,
obligations, claims or losses that would be required to be disclosed on a
balance sheet of the Company (including the notes thereto), other than those
incurred in the ordinary course of the Company's business since September 30,
1998 and which, individually or in the aggregate, do not or would not have a
material adverse effect on the Company's financial condition or operating
results.
48
<PAGE>
3.8 Title to Assets. The Company has good and marketable title
to all of its property and assets, free of any mortgages, pledges, charges,
liens, security interests or other encumbrances, except for those indicated in
the Commission Filings or the Disclosure Letter or such that could not
reasonably be expected to cause a material adverse effect on the Company's
financial condition or operating results.
3.9 Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company, which questions the validity of this Agreement
or the transactions contemplated hereby or any action taken or to be taken
pursuant hereto or thereto. Except as set forth in the Commission Filings or the
Disclosure Letter, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets and
which, if adversely determined, is reasonably likely to result in a material
adverse effect on the Company's financial condition or operating results.
3.10 Compliance with Law. To the knowledge of the Company, the
business of the Company has been and is presently being conducted in accordance
with all applicable federal, state and local governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Filings or the
Disclosure Letter, or such that do not cause a material adverse effect. The
Company has all franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted by it unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individual or in the aggregate, could not
reasonably be expected to have a material adverse effect on the Company's
financial condition or operating results.
3.11 Certain Fees. No brokers, finders or financial advisory
fees or commissions will be payable by the Company with respect to the
transactions contemplated by this Agreement.
3.12 Disclosure. To the best of the Company's knowledge,
neither this Agreement nor any other documents furnished to the Purchaser by or
on behalf of the Company in connection with the transactions contemplated by
this Agreement contain any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein or
therein, not misleading.
3.13 Material Agreements. Except as set forth in the
Commission Filings or the Disclosure Letter, the Company is not a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement or applicable form (collectively,
"Material Agreements") if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act"). The Company has in
all material respects performed all the obligations required to be performed by
it under the foregoing agreements, has received no notice of default and, to the
best of the Company's knowledge, is not in default under any Material Agreement
49
<PAGE>
now in effect, the result of which could reasonably be expected to cause a
material adverse effect on the Company's financial condition or operating
results.
3.14 Employees. Except as set forth in the Commission Filings
or the Disclosure Letter or as otherwise disclosed by the Company to the
Purchaser, the Company has no collective bargaining arrangements or agreements
covering any of its employees.
3.15 Intellectual Property, Trademarks, etc. The Company has
the right to use, free and clear of all liens, charges, claims and restrictions,
all intellectual property, patents, trademarks, service marks, trade names,
copyrights, licenses and rights necessary to the business of the Company as
presently conducted. To the best of the Company's knowledge, the Company is not
infringing upon or otherwise acting adversely to the right or claimed right of
any other person under or with respect to the foregoing.
Section 4
Representations and Warranties of the Purchasers
Each Purchaser hereby represents and warrants to the Company, as to
himself only and not with respect to any other Purchaser, with respect to the
purchase of Shares as follows:
4.1 Experience; Speculative Nature of Investment. Each Purchaser
(or its principals or advisors) has substantial experience in evaluating and
investing in private placement transactions of securities in companies simi-
lar to the Company so that it is capable of evaluating the merits and risks of
its investment in the Company and has the capacity to protect its own interests.
Each Purchaser acknowledges that its investment in the Company is
highly speculative and entails a substantial degree of risk and each Purchaser
is in a position to lose the entire amount of such investment.
4.2 Investment. Each Purchaser is acquiring the Shares for
investment for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof. Each Purchaser
understands that the Shares to be purchased hereby have not been, and will not
be, registered under the Securities Act (except as provided in Section 3 of the
Rights Agreement) by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Purchasers' representations as expressed herein. Each Purchaser is an
"accredited investor" within the meaning of Regulation D, Rule 501(a),
promulgated by the Securities and Exchange Commission.
4.3 Rule 144. Each Purchaser acknowledges that the Shares must be
held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. Each Purchaser is aware
of the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
50
<PAGE>
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations. Each Purchaser understands that the
certificates evidencing the Shares will be imprinted with a legend that
prohibits the transfer of such securities unless they are registered or such
registration is not required.
4.4 Access to Data. Each Purchaser has had an opportunity to discuss
the Company's business, management and financial affairs with its manage-
ment. Each Purchaser has also had an opportunity to ask questions of
officers of the Company, which questions were answered to its satisfaction. Each
Purchaser understands that such discussions, as well as any written information
issued by the Company, were intended to describe certain aspects of the
Company's business and prospects but were not a thorough or exhaustive
description.
4.5 Authorization. The Agreements, when executed and delivered
by the Purchasers, will constitute valid and legally binding obligations of each
Purchaser, enforceable in accordance with their terms, except as the
indemnification provisions of Section 1.9 of the Rights Agreement may be limited
by principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
4.6 Brokers or Finders. The Purchasers have not engaged any brokers,
finders or agents, and the Company has not, and will not, incur, directly
or indirectly, as a result of any action taken by Purchasers, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreements. In the event that the preceding
sentence is in any way inaccurate, each Purchaser agrees to indemnify and hold
harmless the Company and each other Purchaser from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability) for which the Company, any other
Purchaser, or any of their officers, directors, employees or representatives, is
responsible.
4.7 Tax Liability. Each Purchaser has reviewed with its own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by the Agreements. With respect to
such matters, each Purchaser relies solely on such advisors and not on any
statements or representations of the Company or any of its agents other than the
representations and warranties set forth herein. Each Purchaser understands that
it (and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by the
Agreements.
4.8 Recent Transfers. The Purchasers have not purchased, sold
or transferred any security of the Company within the sixty days immediately
preceding the date of this Agreement.
51
<PAGE>
Section 5
Conditions to Purchasers' Obligations to Close
The Purchasers' obligations to purchase the Shares are, unless waived
by the Purchasers, subject to the fulfillment of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in
the Agreements to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
5.3 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
5.4 Rights Agreement. The Company and the Purchasers shall have
executed and delivered the Rights Agreement.
5.5 Compliance Certificate. The Chief Executive Officer of the Company
shall have executed a Compliance Certificate, in the form of Exhibit C hereto,
certifying the satisfaction of the conditions to closing listed in Sections 5.1
and 5.2 hereof.
5.6 Compliance with Law. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the sale
and issuance of the Shares and the consummation of the transactions contemplated
hereby.
5.7 Opinion of Company's Counsel. Purchasers shall have received from
Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion addressed
to the Purchasers, dated the Closing Date and in substantially the form attached
as Exhibit D.
Section 6
Conditions to Company's Obligations to Close
The Company's obligation to sell and issue the Shares is, unless waived
by the Company, subject to the fulfillment of the following conditions:
6.1 Representations. The representations and warranties made by the
Purchasers in Section 4 hereof shall be true and correct as of the Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in
the Agreements to be performed by Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
52
<PAGE>
6.3 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
6.4 Rights Agreement. The Company and the Purchasers shall have
executed and delivered the Rights Agreement.
6.5 Compliance with Law. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the sale
and issuance of the Shares and the consummation of the transactions contemplated
hereby.
Section 7
Covenants of the Company
7.1 Board of Directors. The Company covenants and agrees that for so
long as the Purchasers (or either of them) hold more than 50% of the Shares (as
adjusted for stock splits, stock dividends, recapitalizations, and the like),
the Company shall, subject to applicable law, use its reasonable best efforts to
obtain the election of one nominee designated by the Purchasers at the next
election of the Board of Directors of the Company or upon the next vacancy
caused by the resignation, death or removal of a director, whichever occurs
first, and thereafter, to the extent permissible by applicable law, to maintain
such nominee as a member of the Board of Directors of the Company.
Section 8
Miscellaneous
8.1 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of California, without regard to its choice of
law rules.
8.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchasers and the
closing of the transactions contemplated hereby.
8.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Purchasers to purchase the Shares
shall not be assignable without the prior written consent of the Company.
8.4 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
53
<PAGE>
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and holders
of a majority of the Shares.
8.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to Purchasers, at each Purchaser's address, as shown below, or
at such other address as such Purchaser shall have furnished to the Company in
writing, or (b) if to any other holder of any Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Shares who has so furnished an address to the Company, or (c) if
to the Company, one copy should be sent to its address set forth on the cover
page of this Agreement and addressed to the attention of the Chief Executive
Officer, or at such other address as the Company shall have furnished to the
Purchaser.
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
8.6 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
8.7 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
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<PAGE>
8.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.10 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
8.11 Expenses. The Company and the Purchaser shall each bear their own
fees, costs and expenses incurred on their behalf with respect to the Agreements
and the transactions contemplated hereby and any amendments or waiver thereto;
provided, however, the Company shall pay the attorney's fee of one (1) counsel
to the Purchasers not to exceed $5000 in the aggregate.
8.12 Limitation on Liability. Notwithstanding anything in this
Agreement to the contrary, no Purchaser shall have any liability for any
misrepresentation, breaches of representations or warranties or breaches of
covenants made by any other Purchaser under or in connection with this
Agreement.
8.13 Attorney's Fees. In any action brought or maintained by either
party asserting a cause of action arising under or relating in any way to this
Agreement, the prevailing party shall be entitled to recover its reasonable
costs and attorney's fees.
55
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
EUPHONIX, INC.
a California corporation
By: /s/ Barry Margerum
__________________
Barry Margerum, Chief Executive Officer
/s/ Dieter Meier
________________
Dieter Meier
Address: 8032 Zurich
Aurorastrasse 78
/s/ Stephen D. Jackson
______________________
Stephen D. Jackson
Address: 1307 East Pine
Lodi, CA 95240
[Signature Page to Purchase Agreement]
56
<PAGE>
<TABLE>
<CAPTION>
<S>
EXHIBIT A
SCHEDULE OF PURCHASERS
<C> <C> <C>
Name Number of Shares Purchase Price
______________________ _________________________ ___________________
Dieter Meier 1,000,000 $987,300.00
Stephen D. Jackson 320,446 $316,376.00
</TABLE>
57
<PAGE>
EXHIBIT 10.12
EUPHONIX, INC.
220 Portage Avenue
Palo Alto, California 94306
REGISTRATION RIGHTS AGREEMENT
January 26 , 1999
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TABLE OF CONTENTS
Page
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Section 1 Restrictions on Transferability of Securities; Compliance with
Securities Act; Registration Rights.................................60
1.1 Restrictions on Transferability...........................60
1.2 Certain Definitions.......................................60
1.3 Restrictive Legend........................................62
1.4 Restrictions on Transfer; Notice of Proposed Transfers....62
1.5 Requested Registration....................................63
1.6 Company Registration......................................65
1.7 Expenses of Registration..................................66
1.8 Registration Procedures...................................67
1.9 Indemnification...........................................67
1.10 Information by Holder.....................................69
1.11 Rule 144 Reporting........................................69
1.12 Transfer of Registration Rights...........................69
1.13 Standoff Agreement........................................69
1.14 Termination of Registration Rights........................69
1.15 [Intentionally Deleted....................................69
1.16 Standstill Agreement......................................69
Section 2 Miscellaneous.....................................................70
2.1 Governing Law.............................................70
2.2 Survival..................................................70
2.3 Successors and Assigns....................................70
2.4 Entire Agreement; Amendment...............................70
2.5 Notices, etc..............................................70
2.6 Delays or Omissions.......................................70
2.7 Counterparts..............................................71
2.8 Severability..............................................71
2.9 Titles and Subtitles......................................71
2.10 Attorney's Fees...........................................71
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EUPHONIX, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of
January 26, 1999 between Euphonix, Inc., a California corporation (the
"Company") and the Purchasers of the Company's Common Stock (the "Common
Purchasers") pursuant to the Company's Common Stock Purchase Agreement dated
January 26, 1999 (the "Common Stock Agreement").
The Common Purchasers agree to be bound by all of the terms and
conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Restrictions on Transferability of Securities; Compliance with
Securities Act; Registration Rights
(a) Restrictions on Transferability. The Common Stock
purchased pursuant to the Common Stock Agreement shall not be sold, assigned,
transferred or pledged except upon the conditions specified in this Section 1,
which conditions are intended to ensure compliance with the provisions of the
Securities Act (as defined below). The Common Purchasers will cause any proposed
purchaser, assignee, transferee, or pledgee of any such shares held by the
Common Purchasers to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 1.
(b) Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Closing Date" shall mean the date of the first purchase and
sale of Common Stock pursuant to the Common Stock Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock of the Company, par
value $0.001 per share.
"Holder" shall mean (i) any Common Purchaser holding
Registrable Securities and (ii) any person holding Registrable Securities to
whom the rights under this Section 1 have been transferred in accordance with
Section 1.12 hereof.
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"Initiating Holders" shall mean Holders or transferees of any
Holders under Section 1.12 hereof who in the aggregate are Holders of greater
than 50% of the Registrable Securities.
"Registrable Securities" means (i) the Common Stock issued
pursuant to the Common Stock Agreement and (ii) any Common Stock of the Company
issued or issuable in respect of such Common Stock upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issuable with respect to such Common Stock; provided, however, that shares of
Common Stock, or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, whether in a registered offering, Rule 144 or otherwise, or (B)
sold or are, in the opinion of counsel for the Company, available for sale in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 1.5
and 1.6 hereof, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company), and the reasonable fees and disbursements if one counsel
for all Holders not to exceed $20,000.
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 1.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all reasonable fees and disbursements of counsel
for any Holder.
"Total Voting Power" of the Company shall mean the total
number of the votes which may be cast in the election of directors of the
Company at any meeting of stockholders if all securities entitled to vote in
this election of directors were present and voted at such meeting.
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"Voting Securities" shall mean all securities of the Company
entitled to vote in the election of directors of the Company and all securities
of the Company convertible into, exchangeable or exercisable for shares of
Common Stock.
(c) Restrictive Legend. Each certificate representing (i) the
Common Stock issued pursuant to the Common Stock Agreement and (ii) any other
securities issued in respect of such Common Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 1.4 below) be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
REGISTRATION RIGHTS AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
Each Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Common Stock in
order to implement the restrictions on transfer established in this Section 1.
(d) Restrictions on Transfer; Notice of Proposed Transfers.
The holder of each certificate representing Restricted Securities by acceptance
thereof agrees to comply in all respects with the provisions of this Section
1.4. Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities (other than (i) a transfer not involving a change in
beneficial ownership, (ii) in transactions involving the distribution without
consideration of Restricted Securities by the Holder to any of its partners, or
retired partners, or to the estate of any of its partners or retired partners,
(iii) any transfer by any Holder to (A) any individual or entity controlled by,
controlling, or under common control with, such Holder or (B) any individual or
entity with respect to which such Holder (or any person controlled by,
controlling, or under common control with, such Holder) has the power to direct
investment decisions, (iv) to the spouse of a holder of Restricted Securities,
or (v) in transactions in compliance with Rule 144, provided, in each case, that
the transferee agrees in writing to be subject to the terms hereof), and unless
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there is in effect a registration statement under the Securities Act covering
the proposed transfer, the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and, if
requested by the Company, shall be accompanied, at such holder's expense, by an
unqualified written opinion of legal counsel who shall be, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. It is agreed that the Company will not request an
opinion of counsel for the Holder for transactions made in reliance on Rule 144
under the Securities Act except in unusual circumstances, the existence of which
shall be determined in good faith by the Board of Directors of the Company. Each
certificate evidencing the Restricted Securities transferred as above provided
shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in Section 1.3 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for such holder and the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
(e) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from Initiating Holders a written request that the Company
effect any registration, qualification or compliance with respect to the
Registrable Securities, the Company will:
(1) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(2) as soon as practicable, use its best
efforts to effect such registration, qualification or compliance (including,
without limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of such written notice from the Company;
Provided, however, that the Company shall not
be obligated to take any action to effect any such registration, qualifi-
cation or compliance pursuant to this Section 1.5:
a) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Securities Act;
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b) Prior to six (6) months after the Closing Date;
c) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on
the date six (6) months immediately following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
d) Unless the aggregate number of shares of Regis-
trable Securities sought to be registered by all Initiating Holders and other
Holders pursuant to this Section 1.5 is greater than one (1) million shares;
e) After the Company has effected one (1)such regis-
tration pursuant to this subparagraph 1.5(a), and such registration has been
declared or ordered effective; or
f) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for a registration statement to be
filed in the near future, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 1.5 shall be defer-
red for a period not to exceed 120 days from the date of receipt of written
request from the Initiating Holders; provided that the Company may not
exercise this deferral right more than once per twelve (12)
month period.
Subject to the foregoing clauses (A) through (F), the Company
shall file a registration statement covering the Registrable Securities so re-
quested to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders, but in any event within 120 days of such
request.
(ii) Underwriting. In the event that a registration pursuant
to Section 1.5 is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). In such event, the right of any Holder to registration
pursuant to Section 1.5 shall be conditioned upon such Holder's participation
in the underwriting arrangements required by this Section 1.5, and the inclu-
sion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an under-
writing agreement in customary form with the managing underwriter selected for
such underwriting by a majority in interest of the Initiating Holders, but
subject to the Company's reasonable approval. Notwithstanding any other
provision of this Section 1.5, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then (i) any securities requested to
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be registered by persons other than Holders (as defined herein) or the Holders
of Registrable Securities (as such terms are defined in that certain Modifi-
cation Agreement, dated November 6, 1991 (the "Modification Agreement"), by
and between the Company, the First Series A Purchasers, the Second Series A
Purchasers, the Series B Purchasers, the Series C Purchasers and the Affiliates
(each as defined in the Modification Agreement)) shall be limited (or excluded
entirely) on a pro rata basis from such registration, and (ii) if the managing
underwriter determines that a further limitation is required, the Company
shall so advise all Holders of Registrable Securities under this Agree-
ment and the Holders of Registrable Securities under the Modification
Agreement and the number of shares of Registrable Securities (including those
under the Modification Agreement) that may be included in the registration and
underwriting shall be allocated among all Holders under this Agreement and
Holders under the Modification Agreement in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities (including those under the Modification Agreement) excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder (both under this Agreement and the
Modification Agreement) to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be with-
drawn from registration, and such Registrable Securities shall not be trans-
ferred in a public distribution prior to 120 days after the effective date of
such registration, or such other shorter period of time as the underwriters
may require.
(f) Company Registration.
(i) Notice of Registration. If at any time or
from time to time the Company shall determine to register any of its
securities, either for its own account or the account of a security holder
or holders, other than (i) a registration relating solely to employee benefit
plans, or (ii) a registration relating solely to a Commission Rule 145 trans-
action, the Company will:
(1) promptly give to each Holder written notice
thereof; and
(2) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after receipt of such
written notice from the Company, by any Holder.
(ii) Underwriting. If the registration of which
the Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the writ-
ten notice given pursuant to Section 1.6(a)(i). In such event, the right of
any Holder to registration pursuant to Section 1.6 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of Regis-
trable Securities in the underwriting to the extent provided herein.
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All Holders proposing to distribute their securities through such under-
writing shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company.
Notwithstanding any other provision of this Section 1.6, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit (or
exclude entirely) on a pro rata basis the Registrable Securities of the
Affiliates (as each term is defined in the Modification Agreement) to be
included in such registration. If all Registrable Securities of the Affiliates
(as each term is defined in the Modification Agreement) have been excluded from
such registration and the managing underwriter determines that a further
limitation is required, the managing underwriter may limit the remaining
Registrable Securities (including those under the Modification Agreement) to be
included in such registration; provided, however, that the managing underwriter
may not reduce the amount of Registrable Securities of the Holders under the
Modification Agreement to be included in the registration to less than 25% of
the total shares so included; provided further, however, that such percentage
may be reduced or waived by the Holders of a majority of the Registrable
Securities under the Modification Agreement, excluding Registrable Securities
held by the Affiliates (each as defined under the Modification Agreement). The
Company shall so advise all Holders under this Agreement and under the
Modification Agreement and other holders distributing their securities through
such underwriting and the number of shares of Registrable Securities (including
those under the Modification Agreement) and other securities that may be
included in the registration and underwriting shall be allocated among all the
Holders under this Agreement and under the Modification Agreement and such other
holders exercising their registration rights in proportion, as nearly as
practicable, to the respective amounts of securities entitled to inclusion in
such registration held by such Holders and such other holders exercising their
registration rights at the time of filing the registration statement. To
facilitate the allocation of shares in accordance with the above provisions, the
Company may round the number of shares allocated to any Holder (both under this
Agreement and the Modification Agreement) or holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 120 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(iii) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by
it under this Section 1.6 prior to the effectiveness of such registration
whether or not any Holder has elected to include securities in such
registration.
(g) Expenses of Registration. All Registration Expenses
incurred in connection with (i) one (1) registration pursuant to Section 1.5 and
(ii) all registrations pursuant to Section 1.6 shall be borne by the Company.
Unless otherwise stated, all Selling Expenses relating to securities registered
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on behalf of the Holders and all other Registration Expenses shall be borne by
the Holders of such securities, and by the Company, in the event the Company
participates in the registration, pro rata on the basis of the number of shares
so registered. Notwithstanding the above, the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section
1.5 above if the registration request is subsequently withdrawn at the request
of the Holders of a majority of the Registrable Securities to be registered
(which Holders shall bear such expenses).
(h) Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(i) Prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for at least
one hundred eighty (180) days or until the distribution described in the
registration statement has been completed;
(ii) Furnish to the Holders participating in such registra-
tion and to the underwriters of the securities being registered such reason-
able number of copies of the registration statement, preliminary prospectus,
final prospectus and such other documents as such underwriters may reason-
ably request in order to facilitate the public offering of such securities;
(iii) Prepare and file with the Commission such amend-
ments and supplements to such registration statement and the prospectus used in
connection with such registration statements as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions; and
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its obli-
gations under such an agreement.
(i) Indemnification.
(i) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
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underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect there-
of), including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or comp-
liance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act, the Exchange Act, state
securities law or any rule or regulation promulgated under such laws applicable
to the Company in connection with any such registration, qualification or comp-
liance, and within a reasonable period the Company will reimburse each such
Holder, each of its officers and directors, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with in-
vestigating, preparing or defending any such claim, loss, damage, liability or
action; provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information fur-
nished to the Company by an instrument duly executed by such Holder, controlling
person or underwriter and stated to be specifically for use therein.
(ii) Each Holder will, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's securi-
ties covered by such a registration statement, each person who controls the
Company or such underwriter within the meaning of Section 15 of the Securities
Act, and each other such Holder, each of its officers and directors and each
person controlling such Holder within the meaning of Section 15 of the Securi-
ties Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration state-
ment, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and within a
reasonable period will reimburse the Company, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue state-
ment)or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instru-
ment duly executed by such Holder and stated to be specifically for use
therein. Notwithstanding the above, the liability of each Holder under this
subsection (b) shall not exceed such Holder's net proceeds from the sale of
securities pursuant to such registration statement, unless such liability arises
out of or is based on willful misconduct by such Holder.
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(iii) Each party entitled to indemnification under this
Section 1.9 the"Indemnified Party") shall give notice to the party re-
quired to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indem-
nity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose ap-
proval shall not unreasonably be withheld), and the Indemnified Party may par-
ticipate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 1
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further,
that the Indemnifying Party shall not assume the defense for matters as to which
there is a conflict of interest or separate and different defenses. No Indemni-
fying Party, in the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or litigation.
No Indemnifying Party shall be liable for indemnification hereunder with respect
to any settlement or consent to judgment, in connection with any claim or liti-
gation to which these indemnification provisions apply, that has been entered
into without the prior consent of the Indemnifying Party (which consent will
not be unreasonably withheld).
(j) Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
(k) Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(i) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act,
at all times during which the Company is subject to the reporting requirements
of the Securities Act or the Exchange Act;
(ii) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(iii) So long as a Holder owns any Restricted Secur-
ities, to furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said
Rule 144, and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the posses-
sion of or reasonably obtainable by the Company as the Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
the Holder to sell any such securities without registration.
(l) Transfer of Registration Rights. The rights to cause the
Company to register securities granted Holders under Sections 1.5 and 1.6 may be
assigned to a transferee or assignee reasonably acceptable to the Company (which
consent shall not be unreasonably withheld) in connection with any transfer or
assignment of Registrable Securities by a Holder, provided that (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, and (ii) such assignee or transferee acquires at least 50,000 shares of
Registrable Securities (adjusted for stock splits, stock dividends, stock
recombinations and the like after the date of this Agreement). Notwithstanding
the above, the rights to cause the Company to register securities may be
assigned to any partner, shareholder, equity holder or officer of a Holder
without compliance with item (ii) above, provided written notice thereof is
promptly given to the Company.
(m) Standoff Agreement. In connection with any public offering
of the Company's securities, the Holder agrees, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the underwriters; provided that the officers and directors of
the Company who own stock of the Company also agree to such restrictions.
(n) Termination of Registration Rights. The registration
rights granted pursuant to Section 1 shall terminate as to each Holder at such
time as a public market for the Company's Common Stock exists and all
Registrable Securities held by such Holder may, in the opinion of counsel to the
Company (which opinion shall be addressed and rendered to Holder), be sold
within a given three month period pursuant to Rule 144 or any other applicable
exemption that allows for resale free of registration.
(o) [Intentionally Deleted. ]
(p) Standstill Agreement. No Common Purchaser shall acquire,
directly or indirectly, or cause or permit any affiliate of such Common Pur-
chaser to acquire, directly or indirectly (through market purchases or other-
wise), record or beneficial ownership of any Voting Securities of the Company
representing, which taken together with all securities owned by such persons or
entities, in excess of a percentage greater than twenty-five percent (25%) of
the Total Voting Power of the Company without the prior written consent of the
Company's Board of Directors.
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2. Miscellaneous
(a) Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of California.
(b) Survival. The covenants and agreements made herein shall
survive any investigation made by the Common Purchasers and the closing
of the transactions contemplated hereby.
(c) Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the parties
hereto.
(d) Entire Agreement; Amendment. This Agreement, the Common Stock
Agreement and the other documents delivered pursuant hereto on the Closing Date
constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties, representa-
tions or covenants except as specifically set forth herein or therein. Except
as expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and the holders of a majority of the Registrable
Securities.
(e) Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered
or certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to a Common Purchaser, at such Common Purchaser's
address, as shown on the stock records of the Company, or at such other add-
ress as such Common Purchaser shall have furnished to the Company in writing,
or (b) if to any other holder of the Common Stock, at such address as such
holder shall have furnished the Company in writing, or, until any such holder
so furnishes an address to the Company, then to and at the address of the
last holder of such Common Stock who has so furnished an address to the Com-
pany, or (c) if to the Company, one copy should be sent to its address set
forth on the cover page of this Agreement and addressed to the attention of
the President and Chief Executive Officer, or at such other address as the Com-
pany shall have furnished to the Common Purchasers.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
(f) Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
to this Agreement upon any breach or default of any other party under this
Agreement, shall impair any such right, power or remedy of such nondefaulting
party nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part
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of any party of any breach or default under this Agreement, or any waiver on the
part of any holder of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative
and not alternative.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(h) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this Agreement to
any party.
(i) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
(j) Attorney's Fees. In any action brought or maintained by either
party asserting a cause of action arising under or relating in any way to this
Agreement, the prevailing party shall be entitled to recover its reasonable
costs and attorney's fees.
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The foregoing agreement is hereby executed as of the date first above
written.
EUPHONIX, INC.
/s/ Barry L. Margerum
_____________________
By: Barry L. Margerum
Title: Chief Executive Officer and President
COMMON PURCHASERS:
/s/ Dieter Meier
________________
Dieter Meier
/s/ Stephen D. Jackson
______________________
Stephen D. Jackson
