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Exhibit B
DIGITAL SOUND CORPORATION
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REGISTRATION RIGHTS AGREEMENT
Dated as of December 19, 1997
DIGITAL SOUND CORPORATION
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This Registration Rights Agreement ("Agreement") is made and entered into
as of December 19, 1997, by and among Digital Sound Corporation, a California
corporation (the "Company"), and the investors (herein referred to collectively
as the "Investors" and individually as an "Investor") whose names are listed in
Annex A to the Preferred Stock Purchase Agreement dated the date hereof among
the Company and the Investors (the "Purchase Agreement"). In order to induce
the Investors to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution of
this Agreement is a condition to the closing under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions.
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As used in this Agreement, the following capitalized terms shall have
the following meanings:
Board: The Board of Directors of the Company.
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Claim: Any loss, claim, damages, liability (joint or several)
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or expense (including the reasonable costs of investigation and legal fees and
expenses).
Common Stock: The common stock of the Company.
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Convertible Promissory Notes: The convertible promissory notes
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in the aggregate principal amount of $6,612,502.50 being issued and sold to the
Investors pursuant to the Purchase Agreement.
Equity Security: Any capital stock of the Company or any security
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convertible, with or without consideration, into any such stock, or any security
carrying any warrant or right to subscribe to or purchase any such stock, or any
such warrant or right.
Exchange Act: The Securities Exchange Act of 1934, as from time
------------
to time amended.
Holder: The beneficial owner of a security. For all purposes
------
of this Agreement, the Company shall be entitled to treat the record owner of a
security as the beneficial owner of such security unless the Company has been
given written notice of the existence and identity of a different beneficial
owner. Securities held by a Holder shall be deemed to include any securities
held by affiliates of such Holder. A Holder of Preferred Stock shall be deemed
to be the Holder of the Common Stock into which such Preferred Stock could be
converted.
Indemnified Holder: Any Holder of Restricted Stock, any partner,
------------------
officer, director, employee or agent of any such Holder and any Person who
controls any such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act.
Misstatement: An untrue statement of a material fact or an
------------
omission to state a material fact required to be stated in a Registration
Statement or Prospectus or necessary to make the statements in a Registration
Statement, Prospectus or preliminary prospectus not misleading.
Person: A natural person, partnership, corporation, business
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trust, association, joint venture or other entity or a government or agency or
political subdivision thereof.
Preferred Stock: The Series B Convertible Preferred Stock being
---------------
issued and sold pursuant to the Purchase Agreement and the Series B Convertible
Preferred Stock issuable upon conversion of the Convertible Promissory Notes
being sold pursuant to the Purchase Agreement.
Prospectus: The prospectus included in any Registration
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Statement, as supplemented by any and all prospectus supplements and as amended
by any and all pre-effective
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and post-effective amendments and including all material incorporated by
reference in such prospectus.
Registration: A registration pursuant to Section 2 or 3 hereof.
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Registration Expenses: The out-of-pocket expenses of a
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Registration, including:
(1) all registration and filing fees (including fees with
respect to filings required to be made with the National Association of
Securities Dealers);
(2) fees and expenses of compliance with state securities or
blue sky laws (including fees and disbursements of counsel for the underwriters
or selling holders in connection with blue sky qualifications of the Restricted
Stock and determinations of their eligibility for investment under the laws of
such jurisdictions as the managing underwriters or holders of a majority of the
Restricted Stock being sold may designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company,
counsel for the underwriters and reasonable fees and expenses of counsel (one
firm only) for the sellers of the Restricted Stock;
(5) fees and disbursements of all independent certified
public accountants of the Company incurred in connection with such Registration
(including the expenses of any special audit and "cold comfort" letters incident
to such registration); and
(6) fees and disbursements of underwriters.
Registration Statement: Any registration statement which covers
----------------------
Restricted Stock pursuant to the provisions of this Agreement, including the
Prospectus included in such registration statement, amendments (including post-
effective amendments) and supplements to such registration statement, and all
exhibits to and all material incorporated by reference in such registration
statement.
Restricted Stock: The shares of Common Stock issued or issuable
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(i) upon conversion of the Preferred Stock or (ii) pursuant to a stock dividend,
stock split or other distribution with respect to Common Stock issued upon
conversion of the Preferred Stock.
Securities Act: The Securities Act of 1933, as from time to time
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amended.
SEC: The Securities and Exchange Commission.
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Series B Convertible Preferred Stock: The Series B Convertible Preferred
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Stock of the Company.
Transfer Restricted Security: Restricted Stock that has not been sold to
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or through a broker, dealer or underwriter in a public distribution or other
public securities transaction or sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Rule 144 promulgated thereunder (or any successor rule) and which, together
with all other shares of Restricted Stock held by a given Holder, is not
eligible for sale under such Rule 144 within a three-month period.
underwritten registration or underwritten offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for distribution to
the public.
2. Demand Registration
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a. Timing of Demand Registration
-----------------------------
The Holders of no fewer than 35% of the shares (as adjusted for any stock
split, reverse stock split, stock dividend or similar transaction) of Restricted
Stock may request in writing that the Company file a registration statement
under the Securities Act covering shares of Restricted Stock having an
anticipated aggregate offering price of at least $2,500,000 that are then
Transfer Restricted Securities at any time before the seventh anniversary of the
date of this Agreement.
If the Company is requested to effect a Registration and the Company
furnishes to the Holders of Restricted Stock requesting such Registration a copy
of a resolution of the Board certified by the Secretary of the Company stating
that in the good faith judgment of the Board it would be seriously detrimental
to the Company or its shareholders for such Registration Statement to be filed
on or before the date such filing would otherwise be required hereunder, the
Company shall have the right to defer such filing for a period of not more
than 135 days after receipt of the request for such Registration from the Holder
or Holders of Restricted Stock requesting such Registration; provided that
during such time the Company may not file a registration statement other than on
Form S-8 for securities to be issued and sold for its own account or that of
anyone other than the Holder or Holders of Restricted Stock requesting such
Registration; provided, further, that the Company may not exercise such right
more than once in any twelve-month period. Notwithstanding the foregoing, if
the reasons for deferring such filing should expire within such 135-day period,
the Company shall promptly notify the requesting Holders of such fact and shall
file such Registration Statement as expeditiously as possible, but in no event
later than 135 days after the receipt of request for such Registration.
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b. Maximum Number of Demand Registrations
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The Company shall be obligated to prepare, file and cause to become
effective no more than two registrations pursuant to this Section 2.
c. Participation
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The Company shall promptly give written notice to all Holders of Restricted
Stock upon receipt of a request for a Registration pursuant to Section 2(a)
above. The Company shall include in such Registration such shares of Restricted
Stock for which it has received written requests to register such shares within
10 days after such written notice has been given.
d. Underwriter's Cutback
---------------------
If the public offering of Restricted Stock is to be underwritten and, in
the good faith judgment of the managing underwriter, the inclusion of all the
Restricted Stock requested to be registered hereunder would interfere with the
successful marketing of a smaller number of such shares of Restricted Stock, at
a price per share that is acceptable to a majority in interest of the Holders
requesting such Registration, the number of shares of Restricted Stock to be
included shall be reduced to such smaller number with the participation in such
offering to be pro rata among the Holders of Restricted Stock requesting such
Registration, based upon the number of shares of Restricted Stock owned by such
Holders.
The Company and other Holders of securities of the Company may include such
securities in such Registration if, but only if, the managing underwriter
concludes that such inclusion will not interfere with the successful marketing
of all the Restricted Stock requested to be included in such Registration at a
price per share that is acceptable to a majority in interest of the Holders
requesting such Registration.
e. Managing Underwriter
--------------------
The managing underwriter or underwriters of any underwritten public
offering covered by a Registration shall be selected by the Board, subject to
the approval of the Holders of a majority of the shares of Restricted Stock that
initiate such Registration, which shall not be unreasonably withheld.
f. Registration Expenses
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All Registration Expenses (excluding underwriters' and brokers' discounts
and commissions) incurred in connection with a registration pursuant to this
Section 2 will be borne by the Company.
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3. Piggyback Registrations
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a. Timing of Piggyback Registration and Participation
--------------------------------------------------
The Company shall notify all Holders of Transfer Restricted Securities in
writing at least fifteen (15) days prior to filing any registration statement
under the Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any registration under Section 2
---------
of this Agreement or to any employee or similar benefit plan or a corporate
reorganization on Forms S-4 or S-8 or any successor forms thereto) and will
afford each such Holder an opportunity to include in such registration statement
all or any part of the Transfer Restricted Securities then held by such Holder.
Each Holder desiring to include in any such registration statement all or any
part of the Transfer Restricted Securities held by such Holder shall, within ten
(10) days after receipt of the above-described notice from the Company, so
notify the Company in writing, and in such notice shall inform the Company of
the number of Transfer Restricted Securities such Holder wishes to include in
such registration statement.
b. Unlimited Number of Piggyback Registrations
-------------------------------------------
Each Holder of Transfer Restricted Securities is entitled to an unlimited
number of piggyback registrations pursuant to this Section 3. If a Holder
decides not to include all of its Transfer Restricted Securities in any
registration statement filed by the Company with respect to which it has
piggyback registration rights, such Holder shall nevertheless continue to have
the right to include any Transfer Restricted Securities in any subsequent
registration statement or registration statements, as the case may be, filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
c. Underwriter's Cutback
---------------------
If the public offering of Restricted Stock is to be underwritten and, in
the good faith judgment of the managing underwriter, the inclusion of all the
Transfer Restricted Securities requested to be registered hereunder would
interfere with the successful marketing of a smaller number of such shares in
the offering at a price per share that is acceptable to the Company, in the case
of a Company-initiated registration, or, in the case of a registration by the
holders of securities other than the Holders of Transfer Restricted Securities,
to such holders, the number of shares that may be included in the registration
shall be allocated, first, in the case of a Company-initiated registration, to
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the Company or, in the case of a registration by the holders of securities other
than the Holders of Transfer Restricted Securities, to such other holders, and
second, to each of the Holders requesting inclusion pursuant to this Section 3
of their Transfer
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Restricted Securities in such registration and any other Holders of
"piggyback" registration rights on a pro rata basis among such Holders, based
upon the number of shares of registrable securities owned by such Holders.
The Company and other Holders of securities of the Company may include such
securities in such Registration if, but only if, the managing underwriter
concludes that such inclusion will not interfere with the successful marketing
of all the Transfer Restricted Securities requested to be included in such
Registration at a price per share that is acceptable to the Company, in the
case of a Company-initiated registration, or, in the case of a registration by
the holders of securities other than the Holders of Transfer Restricted
Securities, to such holders.
d. Managing Underwriter
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The managing underwriter or underwriters of any underwritten public
offering covered by a registration pursuant to this Section 3 shall be selected
by the Board.
e. Registration Expenses
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All Registration Expenses incurred in connection with a registration
pursuant to this Section 3 (excluding underwriters' and brokers' discounts and
commissions) will be borne by the Company.
4. Hold-Back Agreements
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a. By Holders of Restricted Stock
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Upon the written request of the managing underwriter of an underwritten
offering to the Holders of the Company's securities pursuant to Section 2 or 3
above, a Holder of Restricted Stock shall not sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any
Restricted Stock (other than those included in such Registration) without the
prior written consent of such managing underwriter for a period (not to exceed
90 days after the effective date of such Registration) that such managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering; provided that no Holder of Restricted Stock shall
be bound by this Section 4(a) unless such Holder is permitted to include any of
such Holders' Restricted Stock then held by such Holder in such Registration
equal to the number of shares of Restricted Stock that such Holder could sell
during such 90-day period under Rule 144 of the Securities Act.
b. By the Company
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The Company agrees not to effect any public or private sale or distribution
of its Equity Securities during the 60-day period prior to, and during the 135-
day period after, the effective date of each underwritten offering made pursuant
to a registration under Section 2 above, if so requested in writing by the
managing underwriter (except as part of such underwritten offering or pursuant
to registrations on Forms S-4 or S-8).
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5. Rule 144.
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The Company covenants that it will timely file the reports required to be
filed by it under the Exchange Act and the rules and regulations adopted by the
SEC thereunder, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without Registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar successor rule or regulation hereafter adopted by the SEC.
6. Registration Procedures
-----------------------
If and whenever the Company is required to register Restricted Stock
in a Registration, the Company will use its best efforts to effect such
Registration to permit the sale of such Restricted Stock in accordance with the
intended plan of distribution thereof, and pursuant thereto the Company will as
expeditiously as possible:
a. prepare and file with the SEC a Registration Statement within 30 days of
such request with respect to such Restricted Stock and use its best efforts to
cause such Registration Statement to become effective within 90 days of such
request and remain effective until the Restricted Stock covered by such
Registration Statement has been sold; provided that the Company shall not be
required to maintain the effectiveness of any Registration Statement for more
than 90 days after such Registration Statement becomes effective;
b. prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be required by the rules, regulations or instructions
applicable to the registration form used by the Company or by the Securities Act
or rules and regulations thereunder to keep the Registration Statement effective
until all Restricted Stock covered by such Registration Statement is sold in
accordance with the intended plan of distribution set forth in such Registration
Statement or supplement to the Prospectus or for such shorter period of time
during which such Registration Statement must be kept effective by the terms of
this Agreement;
c. promptly notify the selling Holders of Restricted Stock and the
managing underwriter, if any, in writing,
(1) when the Prospectus or any supplement or pre- or post-effective
amendment has been fined, and, with respect to the Registration Statement or
any post- effective amendment, when the same has become effective.
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information.
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(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose.
(4) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Restricted Stock for sale in any
jurisdiction or the initiation of any proceeding for such purpose, and
(5) of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by reference
containing a Misstatement;
d. make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible time;
e. if requested by the managing underwriter of Restricted Stock being sold
in connection with an underwritten offering, immediately incorporate in a
supplement or post-effective amendment such information as the managing
underwriter requests to be included therein relating to the sale of the
Restricted Stock, including, without limitation, information with respect to the
number of shares of Restricted Stock being sold to underwriters, the purchase
price being paid therefor by such underwriters and with respect to any other
terms of the underwritten offering of the Restricted Stock to be sold in such
offering; and make all required filings of such supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
supplement or post-effective amendment;
f. promptly prior to the filing of any document which is to be incorporated
by reference into the Registration Statement or the Prospectus (after initial
filing of the Registration Statement) provide copies of such document to counsel
to the selling Holders of Restricted Stock and to the managing underwriter, if
any;
g. furnish to each selling Holder of Restricted Stock and the managing
underwriter, at least one signed copy of the Registration Statement and any
post-effective amendments thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference) promptly after such documents become available
to the Company;
h. promptly deliver to each selling Holder of Restricted Stock and the
underwriters, if any, as many copies of each Prospectus (and each preliminary
prospectus) as such Persons may reasonably request (the Company hereby
consenting to the use of each such Prospectus (or preliminary prospectus) by
each of the selling Holders of Restricted Stock and the underwriters, if any, in
connection with the offering and sale of the Restricted Stock covered by such
Prospectus (or preliminary prospectus));
i. prior to any public offering of Restricted Stock, use all reasonable
efforts to register and qualify such Restricted Stock for offer and sale under
the securities or blue sky laws
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of such jurisdictions as such selling Holders or underwriters may designate in
writing to enable the disposition in such jurisdictions of the Restricted Stock
covered by the Registration Statement; provided that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
j. timely prepare and deliver certificates not bearing any restrictive
legends representing the Restricted Stock to be sold and cause such Restricted
Stock to be in such denominations and registered in such names as the managing
underwriter may request at least three business days prior to any sale of
Restricted Stock to the underwriters;
k. if the Registration Statement or the Prospectus contains a Misstatement,
promptly, but in no event more than five (5) days after the Company becomes
aware of such Misstatement, prepare a supplement or post-effective amendment to
the Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Restricted Stock the Prospectus
will not contain a Misstatement;
l. cause all Restricted Stock covered by the Registration Statement to be
listed on any national securities exchange or authorized for quotation on Nasdaq
or on the National Market System, if the Common Stock of the Company is so
listed or authorized at the time;
m. enter into an underwriting agreement if the registration is an
underwritten registration; and
(1) make such representations and warranties to the underwriters, in
form, substance and scope as are customarily made by issuers to underwriters in
underwritten offerings;
(2) obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter), addressed to the underwriters,
covering the matters customarily covered in opinions delivered to underwriters
in underwritten offerings;
(3) obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters by underwriters in connection with
underwritten offerings;
(4) cause such underwriting agreement to include such indemnification
and contribution provisions as such underwriters shall customarily require; and
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(5) deliver such documents and certificates as may be requested by the
managing underwriter, to evidence compliance with clause (1) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement; and
n. otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its security holders
earnings statements satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of any 12-month period (or 90 days, if
such period is a fiscal year) commencing at the end of any fiscal quarter in
which Restricted Stock is sold to underwriters in an underwritten offering.
7. Indemnification
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a. Indemnification by Company
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The Company agrees to indemnify and hold harmless each Indemnified Holder
from and against all Claims arising out of or based upon any Misstatement or
alleged Misstatement, except insofar as such Misstatement or alleged
Misstatement was made strictly in conformance with information furnished in
writing to the Company by such Indemnified Holder expressly for use in the
document containing such Misstatement or alleged Misstatement. This indemnity
shall not be exclusive and shall be in addition to any liability which the
Company may otherwise have.
The foregoing notwithstanding, the Company shall not be liable to the
extent that any such Claim arises out of or is based upon a Misstatement or
alleged Misstatement made in any preliminary prospectus if (i) having previously
been furnished by or on behalf of the Company with copies of the Prospectus,
such Indemnified Holder failed to send or deliver a copy of the Prospectus with
or prior to the delivery of written confirmation of the sale of Restricted Stock
giving rise to such Claim and (ii) the Prospectus would have corrected such
untrue statement or omission.
In addition, the Company shall not be liable to the extent that any such
Claim arises out of or is based upon a Misstatement or alleged Misstatement in a
Prospectus, (x) if such Misstatement or alleged Misstatement is corrected in an
amendment or supplement to such Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Indemnified Holder thereafter fails to deliver
such Prospectus as so amended or supplemented prior to or concurrently with the
sale to the person who purchased Restricted Stock from such Indemnified Holder
and who is asserting such Claim.
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The Company shall also indemnify underwriters participating in a
distribution covered by a Registration Statement, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Indemnified Holders of
Restricted Stock.
b. Indemnification Procedures
--------------------------
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against an Indemnified Holder in respect
of which indemnity may be sought from the Company, such Indemnified Holder shall
promptly notify the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Holder and the payment of all reasonable expenses (including
expenses of such counsel).
Such Indemnified Holder shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such separate counsel shall be the expense of such Indemnified
Holder unless (i) the Company has agreed to pay such fees and expenses, (ii) the
Company shall have failed to diligently defend such action or proceeding or has
failed to employ counsel reasonably satisfactory to such Indemnified Holder in
any such action or proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnified
Holder and the Company, and such Indemnified Holder shall have been advised by
counsel that there may be one or more legal defenses available to such
Indemnified Holder that are different from or additional to those available to
the Company.
If such Indemnified Holder notifies the Company in writing that it elects
to employ separate counsel at the expense of the Company as permitted by the
provisions of the preceding paragraph, the Company shall not have the right to
assume the defense of such action or proceeding on behalf of such Indemnified
Holder. The foregoing notwithstanding, the Company shall not be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for such Indemnified Holder and any other Indemnified Holders (which firm
shall be designated in writing by such Indemnified Holders) in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances.
The Company shall not be liable for any settlement of any such action or
proceeding effected without its written consent, which shall not be unreasonably
withheld or delayed, but if settled with its written consent, or if there be a
final judgment for the plaintiff in any such action or proceeding, the Company
agrees to indemnify and hold harmless such Indemnified Holders from and against
any loss or liability by reason of such settlement or judgment.
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c. Indemnification by Holder of Restricted Stock
---------------------------------------------
Each Holder of Restricted Stock agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (a "Company Indemnitee") to the
same extent as the foregoing indemnity from the Company to such Holder, but only
with respect to Misstatements made strictly in conformance with information
relating to such Holder furnished in writing by such Holder expressly for use in
any Registration Statement, Prospectus or preliminary prospectus. In no event,
however, shall the liability hereunder of any selling Holder of Restricted Stock
be greater than the dollar amount of the proceeds (net of underwriters' and
brokers' discounts and commissions) received by such Holder upon the sale of the
Restricted Stock giving rise to such indemnification obligation.
In case any action or proceeding shall be brought against the Company or a
Company Indemnitee, in respect of which indemnity may be sought against a Holder
of Restricted Stock, such Holder shall have the rights and duties given the
Company and the Company or Company Indemnitee shall have the rights and duties
given to each Holder by Sections 6(a) and 6(b) above.
d. Contribution
------------
If the indemnification provided for this Section 6 is unavailable to an
indemnified party under Section 6(a) or Section 6(c) above (other than by reason
of exceptions provided in those Sections) in respect of any Claims referred to
in such Sections, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Claims in such proportion
as is appropriate to reflect the relative fault of the Company or Company
Indemnitee on the one hand and of the Indemnified Holder on the other in
connection with the statements or omissions which resulted in such Claims as
well as any other relevant equitable considerations. The amount paid or payable
by a party as a result of the Claims referred to above shall be deemed to
include, subject to the limitations set forth in Section 7(b), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The relative fault of the Company or Company Indemnitee on the one hand and
of the Indemnified Holder on the other shall be determined by reference to,
among other things, whether the Misstatement or alleged Misstatement relates to
information supplied by the Company or Company Indemnitee or by the Indemnified
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such Misstatement or alleged Misstatement.
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The Company and each Holder of Restricted Stock agree that it would not be
just and equitable if contribution pursuant to this Section 6(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 6(d), an Indemnified Holder
shall not be required to contribute any amount in excess of the amount by which
(i) the net proceeds to the indemnified Holder from the sale of the securities
that were sold by such Indemnified Holder and distributed to the public exceeds
(ii) the amount of any damages which such Indemnified Holder has otherwise been
required to pay by reason of such Misstatement.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
8. Requirements for Participation in Underwritten Offerings
--------------------------------------------------------
No Person may participate in any underwritten offering pursuant to a
Registration hereunder unless such Person (a) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all customary questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Suspension of Sales
-------------------
Upon receipt of written notice from the Company that a Registration
Statement or Prospectus contains a Misstatement, each Holder of Restricted Stock
shall forthwith discontinue disposition of Restricted Stock until such Holder
has received copies of the supplemented or amended Prospectus required by
Section 4(k) hereof, or until such Holder is advised in writing by the Company
that the use of the Prospectus may be resumed, and, if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Restricted Stock current at the time of receipt of
such notice.
10. Miscellaneous
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a. Amendments and Waivers
----------------------
The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has
obtained the written consent of the Holders of at least a majority of the
outstanding shares of Restricted Stock. The foregoing notwithstanding, a waiver
or consent to departure from the provisions hereof that relates exclusively to
the rights of Holders of shares of Restricted Stock whose shares are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders of shares of Restricted Stock may be given by
the Holders of a majority of the shares of Restricted Stock being sold.
Page 65 of 74
b. Notices
-------
All notices and other communications provided for or permitted hereunder
shall be made in writing by hand-delivery, registered first-class mail,
facsimile, or air courier guaranteeing overnight delivery:
i) if to a Holder of Restricted Stock, at the most current address given
by such Holder to the Company in accordance with the provisions hereof, which
address initially is, with respect to each Investor, the address set forth on
such Investor's signature page of the Purchase Agreement; and
ii) if to the Company, initially at its address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions hereof.
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when receipt is
electronically acknowledged, if by facsimile; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
c. Successors and Assigns
----------------------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. The foregoing notwithstanding,
the registration rights granted the Holders of Restricted Stock under this
Agreement may not be transferred without the prior written consent of the
Company which shall not be unreasonably withheld or delayed; provided, that such
registration rights shall not be transferable except in connection with the
simultaneous transfer to the same transferee of no less than the lesser of
200,000 shares of Restricted Stock or all of the shares of Restricted Stock then
held by such Holder; provided, further, that such registration rights may be
transferred without such prior written consent upon written notice to
Page 66 of 74
the Company in connection with the transfer of shares of Restricted Stock to an
Investor or to any affiliate of an investor.
d. Counterparts
------------
This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
e. Headings
--------
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
f. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
g. Severability
------------
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
h. Forms
-----
All references in this Agreement to particular forms of registration
statements are intended to include all successor forms which are intended to
replace, or to apply to similar transactions as, the forms herein referenced.
i. Entire Agreement
----------------
This Agreement and the Purchase Agreement are intended by the parties as
the final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein with respect to the registration rights granted by the Company
with respect to the securities sold pursuant to the Purchase Agreement. This
Agreement and the Purchase Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
Page 67 of 74
(Signature pages follow)
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DIGITAL SOUND CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇, President
Registration Rights Agreement
▇▇▇▇ ▇. ▇▇▇▇▇▇, an Individual
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, an Individual
Registration Rights Agreement
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an Individual
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an Individual
Page 68 of 74
Registration Rights Agreement
SPRING POINT PARTNERS, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, Managing Partner
Registration Rights Agreement
▇▇▇▇▇▇▇ FAMILY TRUST UTA DTD 12/18/90
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
Registration Rights Agreement
▇▇▇▇▇▇▇▇▇ ▇. AND ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
as Joint Tenants
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Page 69 of 74
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Registration Rights Agreement
▇▇▇▇▇▇ SUSSKIND HEDGECAP FUND, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Investment Management, L.P.
Its: General Partner
By: SSCO, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Director
and Vice President
▇▇▇▇▇▇ HEDGECAP LIMITED
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Investment Management, L.P.
Its: General Partner
By: SSCO, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Director
and Vice President
Page 70 of 74
▇▇▇▇▇▇ OFFSHORE, LIMITED
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Investment Management, L.P.
Its: Investment Advisor
By: SSCO, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Director
and Vice President
Registration Rights Agreement
▇▇▇▇▇▇ PARTNERS, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Investment Management, L.P.
Its: General Partner
By: SSCO, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Director
and Vice President
Page 71 of 74
Registration Rights Agreement
▇▇▇▇▇ GLOBAL INVESTMENTS, LTD.
By: ▇▇▇▇▇ Capital Management, Inc.
Its: Trading Advisor
By: /s/ SARVAS SAVVINIDIS
---------------------------------
Sarvas Savvinidis,
Director of Operations
REMINGTON INVESTMENT STRATEGIES,
L.P.
By: ▇▇▇▇▇ Capital Advisors, L.L.C.
Its: General Partner
By: /s/ SARVAS SAVVINIDIS
---------------------------------
Sarvas Savvinidis,
Director of Operations
Registration Rights Agreement
CITIVENTURE 96 PARTNERSHIP FUND, L.P.
By: Chancellor LGT Asset Management, Inc.,
Its: Investment Advisor
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, Managing
Director
Page 72 of 74
CHANCELLOR LGT PRIVATE CAPITAL
OFFSHORE PARTNERS II, L.P.
By: CPCO Associates, L.P.
Its: Investment General Partner
By: Chancellor LGT Venture Partners, Inc.,
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, Managing
Director
CHANCELLOR LGT PRIVATE CAPITAL
OFFSHORE PARTNERS I, C.V.
By: Chancellor LGT KME IV Partners, L.P.
Its: Investment General Partner
By: Chancellor LGT Venture Partners, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, Managing
Director
Registration Rights Agreement
CHANCELLOR LGT PRIVATE CAPITAL
OFFSHORE PARTNERS III, L.P.
By: CPCP Associates, L.P.
Its: General Partner
Page 73 of 74
By: Chancellor LGT Venture Partners, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, Managing
Director
Registration Rights Agreement
OAK INVESTMENT PARTNERS VII, LIMITED
PARTNERSHIP
By: Oak Associates VII, LLC
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing Member
OAK VII AFFILIATES FUND,
LIMITED PARTNERSHIP
By: Oak VII Affiliates, L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing Member
Page 74 of 74
OAK INVESTMENT PARTNERS V,
LIMITED PARTNERSHIP
By: Oak Associates V, L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇,
Managing Member
OAK V AFFILIATES FUND, LIMITED
PARTNERSHIP
By: Oak V Affiliates,
a Connecticut partnership
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇,
General Partner
Registration Rights Agreement
MICROSOFT CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Chief Financial Officer
-----------------------------------
