EXHIBIT 10.54
EXHIBIT A
IMPERIAL BANK
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ANTIDILUTION AGREEMENT
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This Antidilution Agreement is entered into as of October 30, 1997, by and
between Imperial Bank ("Purchaser") and Digital Sound Corporation ("the
Company").
RECITALS
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A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Stock (the
"Warrant") pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire to
set forth the adjustment in the number of Shares issuable upon exercise of the
Warrant as a result of a Diluting Issuance.
C. Capitalized terms used herein shall have the same meaning as set forth
in the Warrant.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Definitions. As used in this Antidilution Agreement, the following
terms have the following respective meanings:
(a) "Option" means any right, option or warrant to subscribe for, purchase
or otherwise acquire common stock or Convertible Securities.
(b) "Convertible Securities" means any evidences of indebtedness, shares of
stock or other securities directly or indirectly convertible into or
exchangeable for common stock.
(c) "Issue" means to grant, issue, sell, assume or fix a record date for
determining persons entitled to receive any security (including Options),
whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means all common stock (including reissued
shares) Issued (or deemed to be issued pursuant to Section 2) after the date of
the Warrant. Additional Common Shares does not include, however, any common
stock Issued in a transaction described in Sections 2.1, 2.2 and 2.3 of the
Warrant; any common stock Issued upon conversion of preferred stock outstanding
on the date of the Warrant; the Shares; or common stock Issued as incentive or
in a nonfinancing transaction to employees, officers, directors or consultants
to the Company.
(e) "Diluting Issuances" means any issuance of securities, debt, equity, or
otherwise, where the Company issues Additional Common Shares after the date of
the Warrant and the consideration per Additional Common Share (determined
pursuant to Section 9) is less than the Warrant Price in effect immediately
before such Issue other than resulting from or in connection with an issuance of
Preferred Stock provided for in Section 1.7 of the Warrant
2. Deemed Issuance of Additional Common Shares. The shares of common
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stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are deemed to be issued when the Option
is issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed issued upon Issuance of the Convertible
Security. The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the instrument creating the
Options or Convertible Securities.
3. Adjustment of Warrant Price for Diluting Issuances.
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3.1 Adjustment of Exercise Price. If the Company issues a Diluting
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Issuance, the Warrant Price shall be adjusted as provided herein. Within one
hundred and eighty (180) days of the Issue Date of the Warrant Agreement, the
Warrant Price shall be adjusted according to Section 3.1(a) below (Ratchet
Adjustment). After one hundred and eighty (180) days of the Issue Date in the
Warrant Agreement, the Warrant Price shall be adjusted according to Section
3.1(b) below (Weighted Average Adjustment). If Preferred Stock is issued as
provided in Section 1.7 of the Warrant, reference to Warrant Price and number of
shares issued or issuable and correlative terms shall be determined on a per
share basis with reference to the shares into which such stock may be converted.
(a) Ratchet Adjustment. If the Company issues Additional Common
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Shares within 180 days after the Issue Date of the Warrant and the consideration
per Additional Common Share (determined pursuant to Section 9) is less than the
Warrant Price in effect immediately before such Issue, the Warrant Price shall
be reduced to the lesser of:
(i) the amount of such consideration per Additional Common Share;
or
(b) Weighted Average Adjustment. If the Company issues Additional
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Common Shares later than 180 days after the Issue Date of the Warrant and the
consideration per Additional Common Share (determined pursuant to Section 9) is
less than the Warrant Price in effect immediately before such Issue, the Warrant
Price in effect immediately before such Issue shall be reduced, concurrently
with such Issue, to a price (calculated to the nearest hundredth of a cent)
determined by multiplying the Warrant Price by a fraction:
(i) the numerator of which is the number of shares of common
stock outstanding immediately before such Issue plus the number of shares of
common stock that the aggregate consideration received by Company for the
Additional Common Shares would purchase at the Warrant Price in effect
immediately before such Issue, and
(ii) the denominator of which is the number of shares of common
stock outstanding immediately before such Issue plus the number of such
Additional Common Shares.
3.2 Adjustment of Number of Shares. Upon each adjustment of the
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Warrant Price, the number of Shares Issuable upon exercise of the Warrant shall
be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares Issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of this Section 3,
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all securities Issuable upon exercise of any outstanding Convertible Securities
or Options, Warrants, or other rights to acquire securities of the Company shall
be deemed to be outstanding.
4. No Adjustment for Issuances Following Deemed Issuances. No adjustment
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to the Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible
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Securities. If the consideration payable to, or the amount of common stock
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Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
and number of shares issuable upon exercise of the Warrant shall be recomputed
to reflect such increase or decrease. The recomputation shall be made as of the
time of the Issuance of the Options or Convertible Securities. Any prior changes
pursuant to this Section 5 in the Warrant Price and number of shares issuable
upon exercise of the Warrant that occurred after such Issuance because other
Additional Common Shares were Issued or deemed Issued shall also be recomputed.
6. Recomputation Upon Expiration of Options or Convertible Securities. The
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Warrant Price and number of shares issuable upon exercise of the Warrant
computed upon the original Issue of any Options or Convertible Securities, and
any subsequent adjustments based thereon, shall be recomputed when any Options
or rights of conversion under Convertible Securities expire without having been
exercised. In the case of Convertible Securities or Options for common stock,
the Warrant Price shall be recomputed as if the only Additional Common Shares
Issued were the shares of common stock actually Issued upon the exercise of such
securities, if any, and as if the only consideration received therefor was the
consideration actually received upon the Issue, exercise or conversion of the
Options or Convertible Securities. In the case of Options for Convertible
Securities, the Warrant Price shall be recomputed as if the only Convertible
Securities Issued were the Convertible Securities actually Issued upon the
exercise thereof, if any, and as if the only consideration received therefor was
the consideration actually received by the Company (determined pursuant to
Section 9), if any, upon the Issue of the Options for the Convertible
Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price and
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number of shares issuable upon exercise of the Warrant pursuant to Sections 5 or
6 shall increase the Warrant Price or correspondingly affect such number of
shares issuable more than the amount of any decrease made in respect of the
Issue of any Options or Convertible Securities.
8. 30 Day Options. In the case of any Options that expire by their terms
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not more than 30 days after the date of Issue thereof, no adjustment of the
Warrant Price shall be made until the expiration or exercise of all such
Options.
9. Computation of Consideration. The consideration received by the Company
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for the Issue of any Additional Common Shares shall be computed as follows:
(a) Cash shall be valued at the amount of cash received by the Corporation,
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excluding amounts paid or payable for accrued interest or accrued dividends.
(b) Property. Property, other than cash, shall be computed at the fair
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market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of the Company.
(c) Mixed Consideration. The consideration for Additional Common Shares
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Issued together with other property of the Company for consideration that covers
both shall be determined in good faith by the Board of Directors.
(d) Options and Convertible Securities. The consideration per Additional
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Common Share for Options and Convertible Securities shall be determined by
dividing:
(i) the total amount, if any, received or receivable by the Company
for the Issue of the Options or Convertible Securities, plus the minimum amount
of additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon exercise of the Options or
conversion of the Convertible Securities, by
(ii) the maximum amount of common stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) ultimately Issuable upon the
exercise of such Options or the conversion of such Convertible Securities,
assuming receipt by the Company of the minimum amount, if any, of additional
consideration referred to in Section 9(d)(i).
10. General.
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10.1 Governing Law. This Antidilution Agreement shall be governed in
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all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
10.2 Successors and Assigns. Except as otherwise expressly provided
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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.
10.3 Entire Agreement. Except as set forth below, this Antidilution
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Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
10.4 Notices, etc. All notices and other communications required or
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permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Purchaser at Purchaser's address as set forth below, or at
such other address as Purchaser shall have furnished to the Company in writing,
or (b) if to the Company, at the Company's address set forth below, or at such
other address as the Company shall have furnished to the Purchaser in writing.
10.5 Severability. In case any provision of this Antidilution
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Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Antidilution Agreement shall
not in any way be affected or impaired thereby.
10.6 Titles and Subtitles. The titles of the sections and subsections
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of this Agreement are for convenience of reference only and are not to be
considered in construing this Antidilution Agreement.
10.7 Counterparts. This Antidilution Agreement may be executed in any
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number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
PURCHASER ISSUER
IMPERIAL BANK DIGITAL SOUND CORPORATION
By: /s/ B. Robert Suh By: /s/ Clinton E. Anderson
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Name: B. Robert Suh Name: Clinton E. Anderson
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Title: Vice President and CFO Title: Assistant Vice President
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Address: Address:
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