EXHIBIT 10.26
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCKHOLDERS AGREEMENT DATED AS OF
OCTOBER 24, 1997 AMONG DIGITAL THEATER SYSTEMS, INC., A DELAWARE CORPORATION
(THE "ISSUER"), AND THE PARTIES IDENTIFIED THEREIN, AND THE AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT, DATED AS OF JANUARY 27, 2000, AMONG THE ISSUER
AND THE PARTIES IDENTIFIED THEREIN AS SUCH AGREEMENTS MAY BE MODIFIED AND
SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENTS ARE ON FILE AND MAY BE
INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF SUCH AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY BE
ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY,
SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares Warrant No. BCW-______
of Common Stock: _____________
WARRANT
to Purchase Common Stock of
DIGITAL THEATER SYSTEMS, INC.
THIS IS TO CERTIFY THAT ______________________ (the "Investor"), or its
registered assigns, is entitled to purchase in whole or in part from time to
time from Digital Theater Systems, Inc., a Delaware corporation (the "Issuer"),
at any time on and after the Effective Date, but not later than 5:00 p.m.,
California time, on December 31, 2007 (the "Expiration Date"), __________ shares
of Common Stock at a purchase price of $0.01 per share (the "Exercise Price"),
subject to the terms and conditions provided herein and in the Transaction
Documents. The number of shares of Common Stock for which this Warrant shall be
exercisable and the Exercise Price are subject to adjustment from time to time
as provided herein.
SECTION 1. Certain Definitions.
As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly, controls, is under common control
with, or is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the power
to direct the management or policies of the specified Person through the
ownership of voting securities, by contract, voting agreement or otherwise, and
(ii) the terms "controlling", "control with" and "controlled by", etc. shall
have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Current Market Price" or the fair market value, as to any
other property (in either case, the "valuation amount"). The valuation amount
shall be determined in good faith jointly by the Board and the Majority Holders;
provided, however, that if such parties are not able to agree on the valuation
amount within a reasonable period of time (not to exceed twenty (20) Business
Days) the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board and
the Majority Holders. If the Board and the Majority Holders are unable to agree
upon an acceptable investment banking firm within ten (10) Business Days after
the date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing in
the United States, of which no more than three may be named by the Board and no
more than three may be named by the Majority Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
and the Majority Holders shall submit to the investment banking firm their
respective determinations of the valuation amount, and any supporting arguments
and other data as they may desire, within ten (10) days of the appointment of
the investment banking firm, and the investment banking firm shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the investment banking
firm, from among the valuation amounts submitted by the Issuer and the Majority
Holders and the valuation amount calculated by the investment banking firm. Such
determination of the final valuation amount by such investment banking firm
shall be final and binding upon the parties. The fees and expenses of the
investment banking firm and arbitrator (if any) used to determine the valuation
amount shall be paid by the Issuer or the applicable Warrant Holders (on a pro
rata basis), whichever party's valuation amount is excluded from the average
referred to above, unless the investment banking firm's valuation amount is
excluded from the average, in which case such
2
fees and expenses will be divided evenly between the Issuer and such Warrant
Holders. If required by any such investment banking firm or arbitrator, the
Issuer shall execute a retainer and engagement letter containing reasonable
terms and conditions, including, without limitation, customary provisions
concerning the rights of indemnification and contribution by the Issuer in favor
of such investment banking firm or arbitrator and its officers, directors,
partners, employees, agents and Affiliates.
"Board" shall mean the Board of Directors of the Issuer.
"Business Day" shall mean any weekday that is not a
nationally-observed holiday.
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Issuer as in effect at the time in question.
"Change of Control" shall mean (i) any consolidation or merger
of the Issuer, other than any merger or consolidation resulting in the holders
of the capital stock of the Issuer entitled to vote for the election of
directors holding a majority of the capital stock of the surviving or resulting
entity entitled to vote for the election of directors, (ii) any person or entity
that is not a stockholder on the date hereof becoming the holder of a majority
of the capital stock of the Issuer entitled to vote for the election of
directors, or (iii) any sale or other disposition by the Issuer of all or
substantially all of its assets to a third party.
"Common Stock" shall mean the Issuer's Common Stock, par value
$.0001 per share.
"Current Market Price" shall mean, as to any security, the
average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York City time, on such day, or, if on any day such security is not quoted
in the NASDAQ System, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar or successor organization (and in
each such case (i) averaged over a period of 21 days consisting of the day
immediately preceding the day as of which "Current Market Price" is being
determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's length
transactions). If at any time such security is not listed on any domestic
securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Current Market Price" of such security shall be
the fair market value thereof as determined in accordance with the Appraisal
Procedure, using an appropriate valuation method, assuming an arms-length sale
to an independent party. In determining the fair market value of the Common
Stock, a sale of all of the issued and outstanding Common Stock of the Issuer
will be assumed, without giving regard to the lack of liquidity of such stock
due to any restrictions (contractual or otherwise) applicable thereto or any
discount for minority interests and assuming the conversion or exchange of all
securities then outstanding that are convertible into or exchangeable for Common
Stock and the exercise of all rights and warrants (including the Warrants) then
3
outstanding and exercisable to purchase shares of such stock or securities
convertible into or exchangeable for shares of such stock. Common Stock issued
in an underwritten public offering shall be deemed to be issued for fair market
value.
"Effective Date" shall mean September 30, 2000.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term
in Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term
in the first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term
in the first paragraph of this Warrant.
"Holder" shall mean the Investor and its permitted
transferees.
"include" and "including" shall be construed as if followed by
the phrase, "without being limited to".
"Issuer" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Majority Holders" shall mean those Holders holding (or having
the right to receive upon exercise of Warrants) Warrant Stock representing a
majority of the total amount of Warrant Stock held by, or issuable to, all
Holders.
"NASDAQ System" shall mean the National Association of
Securities Dealers Automated Quotation System.
"Person" shall be construed in its broadest possible sense and
shall include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or governmental
branch, authority, agency or political subdivision thereof.
"Registration Rights Agreement" shall mean the Amended and
Restated Registration Rights Agreement dated as of January 27, 2000 among the
Issuer and the other signatories thereto, as modified and supplemented and in
effect from time to time.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Stockholders Agreement" shall mean the Stockholders Agreement
dated as of October 24, 1997 among the Issuer and the other signatories thereto,
as modified and supplemented and in effect from time to time.
4
"Transaction Documents" shall mean the Stockholders Agreement
and the Registration Rights Agreement.
"Warrant" shall mean this Warrant and all warrants issued upon
transfer, division, or combination of, or in substitution for, this Warrant.
"Warrant Stock" shall mean (a) all shares of Common Stock
issued or issuable from time to time upon exercise of this Warrant, (b) all
other securities or other property issued or issuable upon any such exercise and
(c) any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b); provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder. As used
in this Warrant, the phrase "Warrant Stock then held" shall mean Warrant Stock
held at the time of determination by the Holder, and shall include Warrant Stock
issuable upon exercise of any Warrants held at the time of determination by such
Xxxxxx.
SECTION 2. Exercise of Warrant.
(a) On and after the Effective Date and until 5:00 p.m.,
California time, on the Expiration Date, the Holder may exercise this Warrant,
on one or more occasions, on any Business Day, in whole or in part, by
delivering to the Issuer, at its office maintained for such purpose pursuant to
Section 5 hereof, (i) a written notice of the Holder's election to exercise this
Warrant, which notice shall be substantially in the form of Annex A attached
hereto and shall be properly completed (the "Exercise Notice"), (ii) payment of
the Exercise Price (payable as set forth in Section 2(b) below) for the Warrant
Stock as to which this Warrant is being exercised, and (iii) this Warrant.
Except to the extent necessary to cause the number of shares of Common Stock
deliverable as provided in Section 2(b) to be a whole number of shares, this
Warrant shall be exercisable in part only for a whole number of shares.
(b) At the option of the Holder, the Exercise Price shall
be payable (i) in cash or by certified or official bank check payable to the
order of the Issuer or (ii) by exchange of this Warrant in accordance with the
further provisions of this Section 2(b). In exchange for the portion of this
Warrant that is being exercised at such time, the Holder shall receive the
number of shares of Common Stock determined by multiplying (A) the number of
shares of Common Stock for which this Warrant is being exercised at such time by
(B) a fraction, (1) the numerator of which shall be the difference between (x)
Current Market Price per share of Common Stock at such time and (y) the Exercise
Price per share of Common Stock, and (2) the denominator of which shall be the
Current Market Price per share of Common Stock at such time. The Issuer shall
issue a new Warrant for the portion, if any, of this Warrant not being exercised
as provided in Section 2(f).
(c) Subject to the provisions of Section 2(d), upon
receipt of an Exercise Notice, the aggregate Exercise Price payable and this
Warrant, the Issuer shall, as promptly as practicable and in any event within
five (5) Business Days thereafter, issue to the Holder one or more stock
certificates representing the aggregate number of shares of Common Stock to
which the Holder is entitled and transfer to the Holder of this Warrant
appropriate evidence of
5
ownership of other securities or property (including any cash) to which the
Holder is entitled, in such denominations, and registered or otherwise placed
in, or payable to the order of, such name or names, as may be directed in
writing by the Holder (subject to restrictions on transfer contained in the
Transaction Documents), and shall deliver such stock certificates, evidence of
ownership and any other securities or property (including any cash) to the
Person or Persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share (or fractional interest in any other
security), as hereinafter provided. The Issuer shall pay all expenses in
connection with, and any and all documentary, stamp or similar issue or transfer
taxes of the United States or any state thereof payable in respect of, the issue
or delivery of the Warrant Stock upon exercise of this Warrant. However, the
Issuer shall not be required to pay any tax or other charge imposed in
connection with any assignment or transfer involved in the issue of any
certificate or other evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may,
in the sole discretion of the Holder, be conditioned upon, and in such event,
the exercise shall be subject in all respects to a Change of Control, the
consummation of a sale of the Issuer, any public offering of the Issuer's Common
Stock registered under the Securities Act or other similar transaction involving
the Issuer (collectively referred to herein as the "Exercise Conditions"), as
specified in the Exercise Notice, and the Issuer shall provide the Holder with
written notice no less than 20 Business Days prior to the occurrence of an
Exercise Condition (or such shorter period of time as is practicable under the
circumstances). If any exercise of this Warrant is so conditioned, then, subject
to delivery of the items required by Section 2(b), the Issuer shall deliver the
certificates and other evidence of ownership of other securities or other
property in such manner as the Holder shall direct as required in connection
with the consummation of the transaction upon which the exercise is conditioned.
At any time that the Issuer shall give notice to the Holder that such
transaction has been abandoned or the Issuer has withdrawn from participation in
such transaction, the Issuer shall return the items delivered pursuant to
Section 2(c) and the Holder's election to exercise this Warrant shall be deemed
rescinded.
(e) The stock certificate or certificates or other
evidence of ownership of Warrant Stock to be delivered pursuant to Section 2(c)
hereof shall be deemed to have been issued, and the Holder or any other Person
so designated to be named therein shall, to the extent permitted by law, be
deemed to have become a holder of record of the Warrant Stock represented
thereby, including having the right to vote any voting securities included
therein or to consent or to receive notice as a shareholder, as of the date on
which the last of the Exercise Notice, payment of the Exercise Price and this
Warrant is received by the Issuer as aforesaid (subject, in the case of an
exercise to which Section 2(d) applies, to the transaction upon which such
exercise is conditioned), notwithstanding that the transfer books of the Issuer
shall then be closed or that such certificates or other evidence of ownership
shall not then actually have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in
part, the Issuer shall, at the time of delivery of the certificate or
certificates or other evidence of ownership of Warrant Stock, execute and
deliver to the Holder, without charge, a new Warrant evidencing the rights of
the Holder to purchase the unpurchased Warrant Stock called for by this Warrant,
which new Warrant shall in all other respects be identical to this Warrant, or,
at the request of the Holder, appropriate notation may be made on this Warrant
and the same returned to the Holder.
6
(g) The Issuer shall not be required to issue any
fractional share of Common Stock (or fractional interest in any other security)
upon exercise of this Warrant. As to any fraction of a share (or fractional
interest in any other security) that the Holder would otherwise be entitled to
receive upon such exercise, the Issuer shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Current Market
Price per share of Common Stock (and/or other security) on the date of exercise;
provided, however, that in the event that the Issuer undertakes a reduction in
the number of shares of Common Stock or other securities outstanding, it shall
be required to issue fractional shares or fractional interests in such other
securities to the Holder if the Holder exercises all or any part of this
Warrant, unless the Holder shall have consented in writing to such reduction and
provided the Issuer with a written waiver of its right to receive fractional
shares or interests in accordance with this paragraph. If the Holder shall
exercise more than one Warrant in the same transaction, any payment in respect
of fractional shares (or other fractional interests) shall be based on the final
fraction resulting from aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep
reserved for issuance and delivery upon exercise of this Warrant such number of
its authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (except to the extent of any applicable provisions set
forth in the Stockholders Agreement, Registration Rights Agreement or the
Issuer's Certificate of Incorporation or Bylaws) and free and clear of all
preemptive or similar rights.
(i) If the issuance of any shares of Common Stock or
other securities required to be reserved for purposes of the exercise of this
Warrant requires the registration with, or approval of, any governmental
authority or requires listing on any national securities exchange or national
market system before such shares or other securities may be so issued, the
Issuer shall at its expense use its best efforts to cause such shares to be duly
registered, approved or listed, as the case may be, so that such shares or other
securities may be issued in accordance with the terms hereof; provided, however,
that this provision shall not obligate the Issuer to register such shares or
other securities under the Securities Act or qualify them under state securities
or blue sky laws.
SECTION 3. Transfer, Division and Combination.
(a) This Warrant, all rights hereunder and any Warrant
Stock issued or issuable upon exercise hereof are assignable and transferable,
at any time in whole or in part, to any Person or Persons, subject in all cases
to the provisions of the Transaction Documents (including the requirement that,
where applicable, a joinder to any such document be executed) and subject to the
restrictions set forth in the legend to this Warrant. Subject to the provisions
of the Transaction Documents, any such transfer shall not require the consent of
any security holder of the Issuer.
7
(b) Upon a transfer permitted by Section 3(a), this
Warrant shall be transferable upon surrender of this Warrant to the Issuer,
together with a written assignment of this Warrant substantially in the form of
Xxxxx X attached hereto, duly executed by the Holder hereof or such Xxxxxx's
agent or attorney. Upon such surrender, the Issuer shall, without charge,
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees (and, if the Holder's entire interest is not being assigned, in the
name of the Holder), and in the denominations specified in such instrument of
assignment, and this Warrant shall promptly be canceled.
(c) This Warrant may be exchanged for, or combined with,
other Warrants upon presentation of this Warrant and any other Warrants with
which this Warrant is to be combined to the Issuer, together with a written
notice specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new Warrant
or Warrants to the Holder in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(d) The Issuer shall maintain books for the registration
and transfer of the Warrants, and shall allow each Warrant Holder to inspect
such books at such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time on or
after the Effective Date the Issuer shall pay any dividend or make any other
distribution to holders of its Common Stock of any cash, evidence of
indebtedness or other property (including any rights or warrants to purchase any
securities of the Issuer) of any nature whatsoever (other than as contemplated
by subsection (b) of this Section 4), the Issuer shall at the same time pay or
distribute to the Holder (whether or not the Holder exercises this Warrant) the
cash, evidence of indebtedness or other property the Holder would have been
entitled to receive if such Xxxxxx had exercised this Warrant immediately prior
to the record date for such dividend or distribution.
(b) Subdivisions and Combinations. If at any time the
Issuer shall
(i) take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution of Common Stock;
(ii) subdivide, split or reclassify its
outstanding shares of Common Stock into a larger number of shares of Common
Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock such holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution) if such
holder had exercised this Warrant immediately prior to the occurrence of such
event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price
8
immediately prior to the occurrence of such event multiplied by (y) a fraction
(1) the numerator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the adjustment in clause (A) and
(2) the denominator of which is the number of shares of Common Stock issuable
upon exercise of this Warrant immediately after the adjustment in clause (A).
(c) Merger, Consolidation or Disposition of Assets. If
the Issuer shall merge, consolidate or effect a share exchange with another
entity, or shall sell, transfer or otherwise dispose of all or substantially all
of its assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive upon the exercise of
this Warrant in accordance with its terms, in respect of the Warrant Stock
issuable upon exercise of this Warrant, and upon delivery to the Issuer or the
Issuer's successor, as applicable, of this Warrant for cancellation, the amount
of cash, shares of Common Stock, other securities or other property that it
would have been entitled to receive if such Holder had exercised this Warrant in
full immediately prior to the occurrence of such merger, consolidation, share
exchange or disposition of assets. In the case of any such merger,
consolidation, share exchange or disposition of assets, the successor or
acquiring entity (and any Affiliate thereof issuing securities) shall expressly
assume the due and punctual observance and performance of each and every
covenant and condition of this Warrant to be performed and observed by the
Issuer and all of the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board and reasonably acceptable to the Majority Holders) in order to provide for
adjustments of the Warrant Stock issuable upon exercise of this Warrant that
shall be as nearly equivalent as practicable to the adjustments provided for in
this Section 4. The foregoing provisions shall similarly apply to successive
mergers, consolidations, share exchanges and dispositions of assets.
(d) Capital Reorganization or Capital Reclassification.
If the Issuer shall effect any capital reorganization or any reclassification of
its capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other property that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4 with
respect to this Warrant.
(e) Notice of Certain Corporate Action. If the Issuer
shall propose (i) to pay any dividend to the holders of its Common Stock or to
make any other distribution to the holders of its Common Stock; (ii) to offer to
the holders of its Common Stock rights to subscribe for or to purchase any
additional shares of Common Stock; (iii) to effect any reorganization or
reclassification of its Common Stock; (iv) to otherwise issue any Common Stock;
(v) to effect any other capital reorganization; (vi) to effect any
consolidation, merger or share exchange or any sale, transfer or other
disposition of all or substantially all of its assets; or (vii) to effect the
liquidation, dissolution or winding up of the Issuer, then, in each such case,
the Issuer shall give
9
to the Holder a notice of such proposed action, which shall specify the date on
which a record is to be taken for the purposes of such dividend, distribution or
rights offer, or the date on which such reclassification, issuance,
reorganization, consolidation, merger, share exchange, sale, transfer,
disposition, liquidation, dissolution or winding up is to take place and the
date of participation therein by the holders of Common Stock, if any such date
is to be fixed, and shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action on the
Common Stock, and the number of shares of Warrant Stock that are issuable upon
exercise of this Warrant after giving effect to any adjustment that will be
required as a result of such action. Such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 10 days prior to the
record date for determining holders of the Common Stock for purposes of such
action, and in the case of any other such action, at least 10 days prior to the
date of the taking of such proposed action.
(f) No Impairment. The Issuer will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Issuer, but will
at all times in good faith assist in the carrying out of all the provisions of
this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment.
(g) Miscellaneous. The computations of all amounts under
this Section 4 shall be made assuming all other anti-dilution or similar
adjustments to be made to the terms of all other securities resulting from the
transaction causing an adjustment pursuant to this Section 4 have previously
been made so as to maintain the relative economic interest of this Warrant vis a
vis all other securities issued by the Issuer.
SECTION 5. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains
outstanding, the Issuer shall maintain an office in the continental United
States where the Warrants may be presented for exercise, transfer, division or
combination as provided in this Warrant. Such office shall be at its principal
executive offices unless and until the Issuer shall designate and maintain some
other office for such purposes and give notice thereof to the Holder.
(b) Notices Generally. Any notices and other
communications pursuant to the provisions hereof shall be sent in accordance
with the provisions of Section 16 of the Registration Rights Agreement.
(c) Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of California without regard
to its conflicts of laws rules.
(d) Limitation of Liability. Except as otherwise provided
herein, this Warrant does not entitle the Holder to any voting rights or other
rights of a shareholder of the Issuer, as a shareholder. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the Exercise Price or as a
shareholder of
10
the Issuer, whether such liability is asserted by the Issuer, by any creditor of
the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the
Issuer of evidence satisfactory to it (in the exercise of its reasonable
discretion) of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction), if requested by the Issuer, of
reasonably satisfactory indemnification (if the Holder is a nationally-chartered
financial institution or an Affiliate thereof, its own agreement being
satisfactory), or (in the case of mutilation) upon surrender and cancellation of
this Warrant, the Issuer shall, without charge, execute and deliver a new
Warrant exercisable for the same amount of Warrant Stock; provided, however,
that (in the case of loss, theft or destruction) no indemnity bond shall be
required unless the Issuer has a class of securities registered pursuant to the
Securities Exchange Act of 1934, as amended, and the Issuer's transfer agent
requires such indemnity bond as a condition to the issuance of a new Warrant.
(f) Amendments and Waivers. Any provision of this Warrant
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Issuer and the Majority Holders
and, in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of
11
any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
* * *
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: September 30, 2000
DIGITAL THEATER SYSTEMS, INC.
By:__________________________
Name:
Title:
12
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this Warrant
for the purchase of ________ shares of Common Stock of Digital Theater Systems,
Inc., a Delaware corporation, and herewith makes payment therefore of
$__________ (such payment being made [check one] (x) [ ] in cash or by certified
or official bank check or (y) [ ] by acceptance of a reduced number of shares of
Common Stock upon cancellation of this Warrant as provided in Section 2(b) of
this Warrant, all on the terms and conditions specified in this Warrant, and
requests that (i) certificates and/or other instruments covering such shares of
Common Stock be issued in accordance with the instructions given below and (ii)
if such shares of Common Stock shall not include all of the shares of Common
Stock to which the Holder is entitled under this Warrant, that a new Warrant for
the un-purchased balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned. References in this Exercise Notice to "Common
Stock" shall include other securities or other property to the extent included
in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].(1)
Dated:_____________________
__________________________________
(Signature of Registered Holder)(2)
Instructions for issuance and registration of
shares of Common Stock:
___________________________ Social Security or Other
Name of Registered Holder Identifying Number:________________
Please deliver certificate to the following
address:
___________________________
Street
___________________________
City, State and Zip Code
-----------------------------------------------
(1) Include if applicable.
(2) The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.
13
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Common Stock covered thereby set forth below to:
Number of
Shares of
Name of Assignee Address Common Stock
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:______________________________
__________________________________
(Signature of Registered Holder)(1)
__________________________________
Name of Registered Holder
Witness: (Please Print
______________________________
---------------------------------------
(1) The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.
14
SCHEDULE OF WARRANT HOLDERS
Weston Presidio Capital II
Eos Partners SBIC, X.X.
Xxx Xxxxxxx
Xxx Xxxxxxxx
15
