<PAGE>
Page 1 of 10
-------------------------------
OMB APPROVAL
-------------------------------
OMB Number: 3235-0145
EXPIRES: OCTOBER 31, 1997
ESTIMATED AVERAGE BURDEN HOURS
PER RESPONSE . . . 14.90
-------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
DIGITAL GENERATION SYSTEMS, INC.
(NAME OF ISSUER)
COMMON STOCK, NO PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
253921100
---------
(CUSIP NUMBER)
SCOTT K. GINSBURG
C/O DIGITAL GENERATION SYSTEMS, INC.
875 BATTERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 276-6600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS)
WITH A COPY TO:
JOHN D. WATSON, JR.
LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W.
SUITE 1300
WASHINGTON, D.C. 20004
(202) 637-2200
DECEMBER 9, 1998
----------------
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of this schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP No. 253921100 Page 2 of 10 Pages
---------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Scott K. Ginsburg
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
1,084,685
---------------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED 2,920,134/1/
BY EACH ---------------------------------------------------------
REPORTING PERSON 9 SOLE DISPOSITIVE POWER
WITH 1,084,685
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,920,134/1/
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,004,819/1/
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
/1/ Consists of 2,920,134 shares held of record by Moon Doggie Family
Partnership, L.P., a partnership of which Mr. Ginsburg is the sole general
partner. Mr. Ginsburg, in such capacity, holds voting and dispositive power over
these shares.
<PAGE>
CUSIP No. 253921100 Page 3 of 10 Pages
---------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Moon Doggie Family Partnership, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
---------------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED 2,920,134/1//2/
BY EACH ---------------------------------------------------------
REPORTING PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,920,134/1//2/
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,920,134/2/
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
/2/Does not include an additional 3,008,527 shares of Common Stock which are
subject to warrants issued to Moon Doggie Family Partnership, L.P. The warrants
are not exercisable prior to December 9, 1999. See Item 5.
<PAGE>
CUSIP No. 253921100 Page 4 of 10 Pages
---------
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, no par value per share (the
"Common Stock") of Digital Generation Systems, Inc., a California corporation
(the "Issuer"). The Issuer's principal executive offices are located at 875
Battery Street, San Francisco, California 94111.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by Scott K. Ginsburg and by Moon Doggie Family
Partnership, L.P., (each a "Reporting Person" and together, the "Reporting
Persons").
(b) The address of the Reporting Persons is 17340 Club Hill Drive, Dallas,
Texas 75248.
(c) Present Principal Business or Employment:
(1) Scott K. Ginsburg: (i) Investor;
(ii) Chairman of the Board of Directors
and Chief Executive Officer of
the Issuer;
(iii) Director/3/
StarGuide Digital Networks, Inc.
300 East Second Street
Suite 1510
Reno, Nevada 89501
(2) Moon Doggie Family
Partnership, L.P. ("Moon
Doggie"): Investment Partnership
(d) and (e) During the last five years neither Reporting Person has been
(i) convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor (ii) been a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction, and is or was, as a result of
such proceeding, subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to such laws.
(f) Mr. Ginsburg is a citizen of the United States. Moon Doggie is a
Delaware partnership.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Mr. Ginsburg purchased 714, 285 shares of Common Stock of the Issuer at a
price of $2.80 per share pursuant to a Common Stock Subscription Agreement dated
as of August 12, 1998 by and among the Issuer, Mr. Ginsburg and certain other
purchasers (the "First Common Stock Subscription Agreement"). Mr. Ginsburg
purchased a total of 370,400 shares of Common Stock of the Issuer in thirty-
three separate, open-market transactions on the date, in the quantities and for
prices listed below.
- --------------------
/3/ Mr. Ginsburg is expected to be named Chairman of the Board of Directors of
StarGuide Digital Network, Inc. in the near future.
<PAGE>
CUSIP No. 253921100 Page 5 of 10 Pages
---------
<TABLE>
<CAPTION>
NUMBER DATE NUMBER OF SHARES PRICE
- ---------------------------------------------------------------------
<S> <C> <C> <C>
1 08/03/98 5,000 3.027
- ---------------------------------------------------------------------
2 08/03/98 2,500 3.090
- ---------------------------------------------------------------------
3 08/03/98 1,000 3.152
- ---------------------------------------------------------------------
4 08/03/98 1,000 3.246
- ---------------------------------------------------------------------
5 08/03/98 15,500 3.277
- ---------------------------------------------------------------------
6 08/03/98 13,500 3.263
- ---------------------------------------------------------------------
7 08/04/98 25,000 3.243
- ---------------------------------------------------------------------
8 08/05/98 1,000 2.902
- ---------------------------------------------------------------------
9 08/07/98 10,000 2.891
- ---------------------------------------------------------------------
10 08/12/98 42,500 3.345
- ---------------------------------------------------------------------
11 08/12/98 7,500 3.340
- ---------------------------------------------------------------------
12 08/13/98 5,000 3.371
- ---------------------------------------------------------------------
13 08/13/98 1,000 3.309
- ---------------------------------------------------------------------
14 08/13/98 22,500 3.277
- ---------------------------------------------------------------------
15 08/13/98 1,000 3.246
- ---------------------------------------------------------------------
16 08/13/98 7,500 3.215
- ---------------------------------------------------------------------
17 08/13/98 5,000 3.340
- ---------------------------------------------------------------------
18 08/14/98 15,500 3.457
- ---------------------------------------------------------------------
19 08/17/98 15,900 3.527
- ---------------------------------------------------------------------
20 08/20/98 2,500 3.152
- ---------------------------------------------------------------------
21 08/21/98 5,000 3.215
- ---------------------------------------------------------------------
22 08/24/98 40,000 3.509
- ---------------------------------------------------------------------
23 08/25/98 1,000 3.496
- ---------------------------------------------------------------------
24 08/25/98 49,000 3.527
- ---------------------------------------------------------------------
25 08/25/98 25,000 3.527
- ---------------------------------------------------------------------
26 08/26/98 10,000 3.527
- ---------------------------------------------------------------------
27 08/27/98 15,000 3.382
- ---------------------------------------------------------------------
28 09/02/98 1,000 3.340
- ---------------------------------------------------------------------
29 09/02/98 2,000 3.371
- ---------------------------------------------------------------------
30 09/02/98 4,000 3.402
- ---------------------------------------------------------------------
31 09/02/98 7,000 3.496
- ---------------------------------------------------------------------
32 09/02/98 7,000 3.527
- ---------------------------------------------------------------------
33 09/02/98 4,000 3.590
- ---------------------------------------------------------------------
</TABLE>
Moon Doggie purchased 2,920,134 shares of Common Stock of the Issuer on December
9, 1998 pursuant to a Common Stock Subscription Agreement dated as of September
29, 1998, as amended by a letter agreement between Moon Doggie and the Issuer
dated as of December 9, 1998 (as amended, the "Second Common Stock Subscription
Agreement"), for a total purchase price of $8,000,000.
Mr. Ginsburg purchased all shares of Common Stock of the Issuer with
personal funds. Moon Doggie purchased all shares of Common Stock of the Issuer
with funds contributed to it by its partners. Mr. Ginsburg maintains ownership
of certain of his shares of Common Stock in a margin account with Goldman, Sachs
& Co. that includes other investments and cash balances of Mr. Ginsburg and
pursuant to which Mr. Ginsburg routinely borrows funds. Indebtedness incurred by
Mr. Ginsburg under the account may be deemed to have been borrowed to acquire
certain of the shares of Common Stock owned by Mr. Ginsburg.
<PAGE>
CUSIP No. 253921100 Page 6 of 10 Pages
---------
ITEM 4. PURPOSE OF TRANSACTION.
Mr. Ginsburg initially acquired shares of Common Stock of the Issuer
pursuant to the First Common Stock Purchase Agreement and in open-market
purchases as a result of his belief that the Common Stock represented an
attractive investment. Mr. Ginsburg subsequently concluded that the Issuer could
benefit from his radio broadcasting management background and experience and his
strategic planning skills. As a result, Mr. Ginsburg entered into negotiations
with the Issuer regarding expanding the role to be played by Mr. Ginsburg in the
Issuer and its business. Pursuant to these negotiations, Mr. Ginsburg caused
Moon Doggie to purchase the Common Stock of the Issuer pursuant to the Second
Common Stock Purchase Agreement with the intent that Mr. Ginsburg, through Moon
Doggie, would effect the control and management of the Issuer. Substantially
contemporaneously with such purchase, Mr. Ginsburg was named Chairman and CEO of
the Issuer. Mr. Ginsburg believes that his holding or controlling a significant
interest in the Issuer assists in aligning the interests of management and
shareholders. In his role as Chairman and CEO, Mr. Ginsburg will be responsible
for the strategic direction of the Issuer, the development and implementation of
its consolidation strategy and developing and maintaining financial community
relationships.
In a separate transaction, Mr. Ginsburg also has recently acquired
voting control of StarGuide Digital Network, Inc. ("StarGuide"), a privately
held company that, through an affiliated partnership, is engaged in businesses
that may be complementary to business conducted or proposed to be conducted by
the Issuer. Mr. Ginsburg may in the future pursue transactions that could result
in combining all or certain operations of the Issuer, on the one hand, and
StarGuide and its affiliated partnership, on the other hand. As of the date
hereof, however, no such transaction is planned or proposed.
Each of Mr. Ginsburg and Moon Doggie may acquire, from time to time,
additional shares of the Common Stock or other securities of the Issuer in the
open market, in privately negotiated transactions, by exchange offer, by
exercise of warrants or options or otherwise. Depending on the factors discussed
herein, each of Mr. Ginsburg and Moon Doggie may, from time to time, retain or
sell all or a portion of his or its holdings of the shares of Common Stock in
the open market or in privately negotiated transactions. Any action taken by Mr.
Ginsburg or Moon Doggie will be dependent upon a review of numerous factors,
including, among other things, the availability of shares of the Common Stock
for purchase and the price levels of such shares; general market and economic
conditions; ongoing evaluation of the Issuer's business operations and
investment opportunities; the actions of others in management and the Board of
Directors of the Issuer; and other future developments.
Although the foregoing reflects activities presently contemplated by Mr.
Ginsburg and Moon Doggie with respect to the Issuer, the foregoing is subject to
change at any time.
Other than described above, neither Mr. Ginsburg nor Moon Doggie has any
present plans or proposals which relate to or would result in: (i) the
acquisition by any person of additional securities of the Issuer, or the
disposition of securities of the Issuer; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving the
Issuer; (iii) a sale or transfer of a material amount of assets of the Issuer;
(iv) any material change in the present capitalization of dividend policy of the
Issuer; (v) any other material change in the Issuer's business or corporate
structure; (vi) changes in the Issuer's certificate of incorporation or by-laws
or other actions which may impede the acquisition of control of the Issuer by
any persons; (vii) causing a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association; (viii) a class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12 (g) (4) of the Securities
Exchange Act of 1934, as amended; or (ix) any action similar to those enumerated
above .
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
<PAGE>
CUSIP No. 253921100 Page 7 of 10 Pages
---------
(a) Scott K. Ginsburg: 4,024,819 shares of Common Stock representing
approximately 15.3% of the outstanding Common Stock. This amount includes
2,920,134 shares of Common Stock held of record by Moon Doggie, of which Mr.
Ginsburg is the sole general partner. Mr. Ginsburg, in his capacity as sole
general partner, holds voting and dispositive power over these shares. By virtue
of Mr. Ginsburg's control of Moon Doggie, Mr. Ginsburg may be deemed to have
beneficial ownership of the shares held of record by Moon Doggie.
Moon Doggie: 2,920,134 shares of Common Stock of the Issuer representing
approximately 11.3% of the outstanding Common Stock. This amount does not
include 3,008,527 shares of Common Stock which are subject to warrants issued to
Moon Doggie, which warrants are not exercisable prior to December 9, 1999. See
Item 6.
(b) Scott K. Ginsburg has sole voting and dispositive power over 1,084,685
shares of Common Stock, representing approximately 4.2% of the outstanding
Common Stock. Mr. Ginsburg, as sole general partner of Moon Doggie, has voting
and dispositive power over 2,920,134 shares of Common Stock, representing
approximately 11.2% of the outstanding Common Stock. Mr. Ginsburg may be deemed
to have beneficial ownership of the shares held of record by Moon Doggie. See
response to Item 5(a) above for additional information.
Moon Doggie has voting and dispositive power over 2,920,134 shares of
Common Stock, representing approximately 11.3% of the outstanding Common Stock.
Because Mr. Ginsburg is the sole general partner of Moon Doggie and, as such,
controls Moon Doggie, Moon Doggie may be deemed to share such voting and
dispositive power over these shares of Common Stock with Mr. Ginsburg. See
response to Item 5(a) for additional information.
(c) On December 9, 1998, Moon Doggie purchased 2,920,134 shares of Common
Stock for a total purchase price of $8,000,000, or approximately $2.74 per
share, pursuant to the Second Common Stock Subscription Agreement.
(d) No person other than Mr. Ginsburg or Moon Doggie has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of Common Stock of the Issuer owned by Mr. Ginsburg
or Moon Doggie.
(e) [Not Applicable]
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
(a) On August 12, 1998, the Issuer and Mr. Ginsburg entered into the First
Common Stock Subscription Agreement for the purchase of 714,285 shares of Common
Stock at a purchase price of $2.80 per share. In connection with such purchase,
the Issuer granted Mr. Ginsburg certain registration rights with respect to the
purchased shares. The foregoing summary of such agreement is qualified in its
entirety by reference to Exhibit 1 which is hereby incorporated by reference.
(b) On September 25, 1998, the Issuer and Mr. Ginsburg entered into the
Second Common Stock Subscription Agreement for the purchase of shares of Common
Stock with an aggregate purchase price not to exceed $8 million, nor to be less
than $6 million. This agreement was amended by that certain letter agreement
dated December 9, 1998 by and between the Issuer and Moon Doggie. In connection
with such purchase, the Issuer has granted to Moon Doggie certain demand
registration rights which may not be exercised for a period of sixty days
following Moon Doggie's purchase of such shares. The foregoing summary of such
agreement is qualified in its entirety by reference to Exhibit 2 and Exhibit 3,
each of which is hereby incorporated by reference.
<PAGE>
CUSIP No. 253921100 Page 8 of 10 Pages
---------
(c) In connection with the purchase of shares of Common Stock by Moon
Doggie pursuant to the Second Common Stock Subscription Agreement, the Issuer
and Moon Doggie have entered into that certain Warrant Purchase Agreement dated
December 9, 1998, pursuant to which the Issuer has issued to Moon Doggie (i) a
warrant to purchase up to 1,460,067 shares of Common Stock at a purchase price
of $3.25 per share (subject to certain adjustments) (the "First Warrant") and
(ii) a warrant to purchase up to 1,548,460 at a purchase price of $3.25 per
share (subject to certain adjustments) (the "Second Warrant"). The First Warrant
is void after December 9, 2001 and is not exercisable prior to December 9, 1999
and, thereafter, is exercisable with respect to 50% of the shares, in whole or
in part with respect to such shares, during the term commencing on the date that
the closing prices of the company's common stock on the Nasdaq National Market
has exceeded $10.00 per share for at least twenty (20) of the preceding thirty
(30) consecutive trading days and ending on 5:00 p.m. on December 9, 2001. The
remaining shares shall become exercisable, in whole or in part, during the term
commencing on the date that the closing price of the company's common stock on
the Nasdaq National Market has exceeded $15.00 per share for at least twenty
(20) of the preceding thirty (30) consecutive trading days and ending on 5:00
p.m. on December 9, 2001. The Second Warrant is void after December 9, 2003 and
is not exercisable prior to December 9, 1999 and, thereafter, is exercisable
only with respect to that portion of the shares that have vested. Shares shall
vest in equal monthly installments upon Mr. Ginsburg's completion of each of the
twenty-four (24) months of continuous service measured from and after the date
of issuance of the Second Warrant. The Second Warrant shall be exercisable for
up to 50% of the vested shares, in whole or in part with respect to such vested
shares, during the term commencing on the date that the closing price of the
company's common stock on the Nasdaq National Market has exceeded $10.00 per
share for at least twenty (20) of the preceding thirty (30) consecutive trading
days and ending on 5:00 p.m. on December 9, 2003. The remaining vested shares
shall become exercisable, in whole or in part, during the term commencing on the
date that the closing price of the company's common stock on the Nasdaq National
Market has exceeded $15.00 per share for at least twenty (20) of the preceding
thirty (30) consecutive trading days and ending on 5:00 p.m. on December 9,
2003. The foregoing summary of such agreements is qualified in its entirety by
such references to Exhibit 4, Exhibit 5 and Exhibit 6, each of which is hereby
incorporated by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Common Stock Subscription Agreement dated August 12, 1998 by and
between Digital Generation Systems, Inc. and Scott K. Ginsburg.
Exhibit 2 Common Stock Subscription Agreement dated September 25, 1998 by
and between Digital Generations Systems, Inc. and Scott K.
Ginsburg.
Exhibit 3 Letter Agreement dated December 9, 1998 by and between Digital
Generation Systems, Inc. and Scott K. Ginsburg for Moon Doggie
Family Partnership.
Exhibit 4 Warrant Purchase Agreement dated as of December 9, 1998 by and
among Digital Generation Systems, Inc. and Moon Doggie Family
Partnership.
Exhibit 5 Warrant No. 1 to Purchase Common Stock of Digital Generations
Systems, Inc.
Exhibit 6 Warrant No. 2 to Purchase Common Stock of Digital Generations
Systems, Inc.
Exhibit 7 Joint Filing Agreement dated as of December 11, 1998 by and between
Scott K. Ginsburg and Moon Doggie Family Investments.
Exhibit 8 Individual Account Agreement, Customer's Options Agreement, and
Trading Authorization with Goldman, Sachs & Co. dated as of
July 10, 1998.
<PAGE>
CUSIP No. 253921100 Page 9 of 10 Pages
---------
SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Scott K. Ginsburg
/s/ Scott K. Ginsburg
_______________________
Dated: December 21, 1998
<PAGE>
CUSIP No. 253921100 Page 10 of 10 Pages
---------
SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Moon Doggie Family Partnership, L.P.
By: /s/ Scott K. Ginsburg
____________________________________
Name: Scott K. Ginsburg
Title: General Partner
Dated: December 21, 1998
<PAGE>
EXHIBIT 1
DIGITAL GENERATION SYSTEMS, INC.
COMMON STOCK SUBSCRIPTION AGREEMENT
The undersigned ("Subscriber") hereby offers to purchase 714,285 shares of
-------
the Common Stock (the "Shares") of Digital Generation Systems, Inc., a
California corporation (the "Company") at a price of $2.80 per share, and is
herewith delivering payment for such Shares by check or wire transfer payable to
the Company.
1. Subscriber, by offering to purchase the Shares, (a) hereby represents and
warrants to the Company that all information provided by Subscriber herewith is
true and correct and (b) hereby represents and warrants to the Company as
follows:
a. Investment. Subscriber is acquiring the Shares for investment for
Subscriber's own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof in violation
of applicable securities laws. Subscriber understands that such Shares have
not been, and will not be, registered under the Securities Act of 1933, as
amended, (the "Securities Act") by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the
accuracy of such Subscriber's representations as expressed herein.
b. Rule 144. Subscriber acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Subscriber is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, except
as otherwise permitted under Rule 144(k), if applicable, (i) the
availability of certain current public information about the Company, (ii)
the resale occurring not less than one year after a party has purchased and
fully paid for the shares to be sold, (iii) the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker"
(as provided by Rule 144(f)) and (iv) the number of shares being sold
during any three-month period not exceeding specified limitations.
c. Legends. Subscriber agrees that each certificate or other document
evidencing any of the Shares shall be endorsed with the legend set forth
below. Subscriber agrees not to transfer the Shares represented by any such
certificate without complying with the restrictions on transfer described
in the legend endorsed on such certificate.
1
<PAGE>
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR
ASSIGNED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION, WITHOUT AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY,
STATING
THAT SUCH SALE, TRANSFER, OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT. THIS CERTIFICATE MUST BE SURRENDERED TO THE
CORPORATION OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER
OF ANY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE.
d. Access to Data. Subscriber has requested and received from the Company all
the information Subscriber considers necessary or appropriate for deciding
whether to purchase the Shares. Subscriber has had an opportunity to ask
questions of and receive answers from management of the Company concerning
the Company, the Company's business and financial affairs and the
Subscriber's purchase of Shares hereunder. Subscriber has had such
questions answered to Subscriber's satisfaction. Subscriber understands
that any information contained in any written documentation or made by
management during discussions with the Company were intended to describe
the aspects of the Company's business and prospects which the Company
believes to be material, but such information does not necessarily provide
a thorough exhaustive description. Subscriber acknowledges that any
estimates or projections as to events that may occur in the future were
based upon the best judgment of the Company's management at the time such
estimates or projections were made and that whether or not such estimates
or projections will depend upon the Company's achieving its overall
business objectives, including the availability of funds resulting from the
sale of the Shares. Subscriber acknowledges there is no assurance that any
projections will be attained.
e. Preexisting Personal or Business Relationship. Subscriber either has a
preexisting personal or business relationship with the Company or any of
its officers, directors or controlling persons or, by reason of
Subscriber's business or financial experience, could be reasonably assumed
to have the capacity to protect Subscriber's own interests in connection
with the purchase of the Shares.
f. Authorization. This agreement, upon acceptance by the Company, will
constitute a valid and legally binding obligation of Subscriber,
enforceable in accordance with its terms.
2
<PAGE>
g. Brokers or Finders. There are no arrangements or claims for brokerage or
finders' fees or agents' commissions or any similar charges in connection
with this agreement or any transaction contemplated hereby based on any
arrangement or agreement known to Subscriber.
h. No Reliance on Third Parties. In purchasing the Shares, Subscriber is not
relying upon any representation or assurance from any person.
i. Risk of Investment. Subscriber understands the risks inherent in new
ventures and the risks associated with unproven technologies such as those
of the Company, and Subscriber has experience in investing in such
ventures. Subscriber can bear the entire loss of his investment in the
Company.
j. No Legal Tax or Investment Advice. Subscriber understands that nothing in
this Agreement or any other materials presented to Subscriber or
information provided by the Company's management in connection with the
purchase and sale of the Shares constitutes legal, tax, or investment
advice. Subscriber has consulted such legal, tax, and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
2. Address. Subscriber's address listed below is true and correct.
3. Subscriber understands that the final number of Shares which may be
purchased by Subscriber will be determined by the Company and that this
offer to purchase Shares is subject to acceptance, in whole or in part, by
the Company. Funds not accepted for the purchase of Shares will be
refunded.
4. Subject to acceptance by the Company of Subscriber's offer to purchase
Shares hereunder and upon receipt of Subscriber's payments, the Company
will cause a stock certificate representing the Shares purchased by
Subscriber to be prepared, and the Company will cause such stock
certificate to be transmitted to the Subscriber at the address shown below.
5. By accepting below, the Company undertakes, within 60 days of the closing
of the round in which the Shares are purchased, to use its diligent efforts
to prepare and file a registration statement with the Securities and
Exchange Commission on Form S-3 registering the shares under the Securities
Act of 1933, as amended, and hereby represents, warrants, covenants and
agrees as to the matters set forth on Annex I attached hereto.
3
<PAGE>
IN WITNESS WHEREOF, Subscriber hereby executes this Agreement as of August 12,
1998.
/s/ Scott K. Ginsburg
- -------------------------------
Signature
Scott K. Ginsburg
- -------------------------------
Print Name
Address: 17340 Club Hill Drive
-----------------------
Dallas, Texas 75248
-----------------------
(Do not write below this line.)
Accepted as to 714,285 Shares as of August 12, 1998.
Digital Generation Systems, Inc.
By: /s/ Henry Donaldson
--------------------------
Henry Donaldson, President
4
<PAGE>
ANNEX I TO SUBSCRIPTION AGREEMENT
By executing the attached Subscription Agreement (the "Agreement"), the Company
hereby represents and warrants to Subscriber that: (a) the Shares have been duly
authorized and, when issued, will be duly and validly issued, fully paid and
non-assessable; (b) the Company has registered its Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Common Stock is listed and traded on the NASDAQ National Market
and the Company has timely filed all material required to be filed pursuant to
all reporting obligations under either Section 13(a) or 15(d) of the Exchange
Act for a period of at least twelve (12) months immediately preceding the offer
or sale of the Shares; (c) the Company has legally available sufficient
authorized and unissued Common Stock as may be reasonably necessary to effect
the sale and issuance of the Shares; (d) the Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company, will
be the valid and binding agreement of the Company enforceable in accordance with
its terms; (e) the execution and delivery of the Agreement by the Company, the
issuance of the Shares, and the consummation by the Company of the other
transactions contemplated by the Agreement, do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws of the
Company, or any material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, or any material
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein; and (f) no authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Shares to Subscriber as
contemplated by the Agreement, except such authorizations, approvals and
consents that have been obtained.
By accepting Subscriber's offer to purchase the Shares, the Company hereby
agrees to enter into a separate registration rights agreement with Subscriber
(and any other purchasers of common stock of the Company in the same round in
which the Shares are purchased) granting Subscriber the demand registration
rights contained in Section 1.3 of the Amendment and Restatement No. 5 to Rights
Agreement entered into as of July 14, 1997 by and among the Company and certain
of its securityholders, which rights shall apply to the registration statement
on Form S-3 referred to in Section 5 of the Agreement. The demand registration
rights so granted will be exercisable no earlier than sixty (60) days following
the closing of the round in which the Shares are purchased. Nothing in this
Section 2 is intended to limit the Company's obligations under section 5 of the
5
<PAGE>
Agreement to file the Form S-3. Notwithstanding anything herein to the contrary,
the Form S-3 shall be maintained effective by the Company until the earlier of
(i) the date as to which Subscriber may sell all of the Shares without
registration in a single transaction pursuant to Rule 144(k) or (ii) the date on
which Subscriber has sold all of the Shares to the public.
6
<PAGE>
EXHIBIT 2
DIGITAL GENERATION SYSTEMS, INC.
Common Stock Subscription Agreement
Subject to the terms and conditions of this Agreement, the undersigned
("Subscriber") hereby offers and agrees to purchase shares of Common Stock (the
"Shares") of Digital Generation Systems, Inc., a California corporation (the
"Company"), and the Company agrees to sell the Shares to Subscriber.
1. The closing of the purchase and sale of the Shares under this Agreement (the
"Closing") shall be held on such date and at such time as the Company shall
select in writing (the "Notice of Closing"), which date shall in no event (i) be
more than sixty (60) days following the date of this Agreement, (ii) be less
than two (2) business days after receipt by the Subscriber of the Notice of
Closing.
2. The price per share shall be equal to the average closing price of the
Company's common stock during the fifteen (15) trading days immediately prior to
the Notice of Closing (the "Purchase Price") and the number of Shares to be sold
by the Company and purchased by Subscriber. The aggregate Purchase Price for
the Shares shall not exceed $8 million nor be less than $6 million.
3. Subscriber, by offering and agreeing to purchase the Shares, (a) hereby
represents and warrants to the Company that all information provided by
Subscriber herewith is true and correct and (b) hereby represents and warrants
to the Company as follows:
a. Investment. Subscriber is acquiring the Shares for investment for
Subscriber's own account, not as a nominee or agent, and not with the view to,
or for resale in connection with, any distribution thereof in violation of
applicable securities laws. Subscriber understands that such Shares have not
been, and will not be, registered under the Securities Act of 1933, as amended,
(the "Securities Act") by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Subscriber's
representations as expressed herein.
b. Rule 144. Subscriber acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Subscriber is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, except as otherwise permitted
under Rule 144(k), if applicable, (i) the availability of certain current public
information about the Company, (ii) the resale occurring not less that one year
after a party has purchased and fully paid for the shares to be sold, (iii) the
sale being effected through a "broker transaction" or in transactions directly
with a "market maker" (as provided by Rule 144(f) and (iv) the number of share
being sold during any three-month period not exceeding specified limitations.
<PAGE>
c. Legends. Subscriber agrees that each certificate or other document
evidencing any of the Shares shall be endorsed with the legend set forth below.
Subscriber agrees not to transfer the Shares represented by any such certificate
without complying with the restrictions on transfer described in the legend
endorsed on such certificate.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS, THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE
ABSENCE OF SUCH REGISTRATION OR QUALIFICATION, WITHOUT AN OPINION OF COUNSEL FOR
THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT. THIS CERTIFICATE MUST BE SURRENDERED TO THE CORPORATION OR ITS TRANSFER
AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY INTEREST IN THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
d. Access to Data. Subscriber has requested and received from the Company
all the information Subscriber considers necessary or appropriate fro deciding
whether to purchase the Shares. Subscriber has received and reviewed copies of
the Company's filings with the Securities and Exchange Commission. Subscriber
has had an opportunity to ask questions of and receiver answers from management
of the Company concerning the Company, the Company's business and financial
affairs and the Subscriber's purchase of Shares hereunder. Subscriber has had
such questions answered to Subscriber's satisfaction. Subscriber understands
that any information contained in any written documentation or made by
management during discussions with the Company were intended to describe the
aspects of the Company's business and prospects which the Company believes to be
material, but such information does not necessarily provide a thorough
exhaustive description. Subscriber acknowledges that any estimates or
projections as to events that may occur in the future were based upon the best
judgment of the Company's management at the time such estimates or projections
were made and that whether or not such estimates or projections will depend upon
the Company's achieving its overall business objectives, including availability
of funds resulting from the sale of the Shares. Subscriber acknowledges there
is no assurance that any projections will be attained.
e. Pre-existing Personal or Business Relationship. Subscriber either has
a pre-existing personal or business relationship with the Company or any of its
officers, directors or controlling persons or, by reason of Subscriber's
business or financial experience, could be reasonably assumed to have the
capacity to protect Subscriber's own interests in connection with the purchase
of the Shares.
f. Authorisation. This agreement, upon acceptance by the Company, will
constitute a valid and legally binding obligation of Subscriber, enforceable in
accordance with its terms.
2
<PAGE>
g. Brokers or Finders. There are no arrangements or claims for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this agreement or any transaction contemplated hereby based on any
arrangement or agreement known to Subscriber.
h. No Reliance on Third Parties. In purchasing the Shares, Subscriber is
not relying upon any representation or assurance from any person.
i. Risk of Investment. Subscriber understands the risks inherent in new
ventures and the risks associated with unproven technologies such as those of
the company, and Subscriber has experience in investing in such ventures.
Subscriber can bear the entire loss of his investment in the Company.
j. No Legal Tax or Investment Advice. Subscriber understands that nothing
in this Agreement or any other materials presented to Subscriber or information
provided by the Company's management in connection with the purchase and sale of
the Shares constitutes legal, tax, or investment advice. Subscriber has
consulted such legal, tax, and investment advisors as it, in it sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Shares.
4. Address. Subscriber's address listed below is true and correct.
5. Subscriber understands that the final number of Shares which may be
purchased by Subscriber will be determined by the Company and that this offer to
purchase Shares is subject to acceptance, in whole or in part, by the Company.
Funds not accepted for the purchase of Shares will be refunded.
6. At the Closing, and upon receipt of Subscriber's payment by check or wire
transfer payable to the Company of the Purchase Price, the Company will cause a
stock certificate representing the Shares purchased by Subscriber to be
prepared, and the Company will cause such stock certificate to be transmitted to
the Subscriber at the address shown below.
7. By accepting below, the Company undertakes, within 60 days of the closing of
the rounds in which the Shares are purchased, to use its diligent efforts to
prepare and file a registration statement with the Securities and Exchange
Commission on Form S-3 registering the Shares under the Securities Act of 1933,
as amended and hereby represents, warrants, covenants and agrees as to the
matters set forth on Annex I attached hereto.
3
<PAGE>
IN WITNESS WHEREOF, Subscriber and the Company hereby execute this
Agreement as of September 25, 1998.
SUBSCRIBER
/s/ Scott K. Ginsburg
- -----------------------------
Signature
Scott K. Ginsburg
- -----------------------------
Print Name
Address:17340 Club Hill Drive
---------------------
Dallas, Texas 75248
---------------------
COMPANY
By: /s/ Henry Donaldson
--------------------------
Henry Donaldson, President
4
<PAGE>
ANNEX I TO SUBSCRIPTION AGREEMENT
1. By executing the attached Subscription Agreement (the
"Agreement"), the Company hereby represents and warrants to Subscriber that:
(a) the Shares have been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-assessable; (b) the Company has registered
its Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the Common Stock is listed and traded on
the NASDAQ National Market and the Company has timely filed all material
required to be filed pursuant to all reporting obligations under either Section
13(a) or 15(d) of the Exchange Act for a period of at least twelve (12) months
immediately proceeding the offer or sale of the Shares; (c) the Company has
legally available sufficient authorized and unissued Common Stock as may be
reasonably necessary to effect the sale and issuance of the Shares; (d) the
Agreement has been duly and validly authorized by the Company and, when executed
and delivered by the Company, will be the valid and binding agreement of the
Company enforceable in accordance with its terms; (e) the execution and delivery
of the Agreement by the Company, the issuance of the Shares, and the
consummation by the Company of the other transactions contemplated by the
Agreement, do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws of the Company, or any material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, or any material existing applicable law, rule or
regulation or any applicable decree, judgment, or order of any court or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein, and (f) no
authorization, approval or consent of any court, governmental body, regulatory
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained by the
Company for the issuance and sale of the Shares to Subscriber as contemplated by
the Agreement, except such authorizations, approvals and consents that have been
obtained.
2. By accepting Subscriber's offer to purchase the Shares, the
company hereby agrees to enter into a separate registration rights agreement
with Subscriber (and any other purchaser of common stock of the company in the
same round in which the Shares are purchased granting Subscriber the demand
registration rights contained in Section 1.3 of the Amendment and Restatement
No.5 of Rights Agreement entered into as July 14, 1997 by and among the Company
and certain of its securityholders, which rights shall apply to the registration
statement on Form S-3 referred to in Section 5 of the Agreement. The demand
registration rights so granted will be exercisable no earlier than sixty (60)
days following the closing of the round in which the Shares are purchased.
5
<PAGE>
Nothing in this Section is intended to limit the Company's obligations
under Section 5 of the Agreement to file the Form S-3. Notwithstanding anything
herein to the contrary, the Form S-3 shall be maintained effective by the
Company until the earlier of (i) the date as to which Subscriber may sell all of
the Shares without registration in a single transaction pursuant to Rule 144 (k)
or (ii) the date on which Subscriber has sold all of the Shares to the public.
6
<PAGE>
EXHIBIT 3
December 9, 1997
Scott K. Ginsburg
17340 Club Hill Drive
Dallas, Texas 75248
RE: SUBSCRIPTION TO PURCHASE SHARES OF COMMON STOCK OF DIGITAL
GENERATION SYSTEMS, INC. (THE "COMPANY)
Mr. Ginsburg:
In connection with the purchase and sale of 2,920,134 shares of the Common
Stock of the Company (the "Common Shares") pursuant to that certain Subscription
Agreement dated September 29, 1998, by and among the Company and you (the
"Subscription Agreement"), the Company and you hereby expressly agree to waive,
and hereby do waive, the provision in Section 1 of the Subscription Agreement
requiring the Closing (as defined in the Subscription Agreement) of the purchase
and sale of the Common Shares to be held no later than sixty (60) days following
the date of the Subscription Agreement. Furthermore, the Company and you hereby
expressly agree to amend, and hereby do amend, Section 1 of the Subscription
Agreement to allow for the Closing to be held no later than December 10, 1998,
unless otherwise mutually agreed upon by the Company and you.
Very truly yours,
DIGITAL GENERATION SYSTEMS, INC.
By: /s/ Henry W. Donaldson
-------------------------------------
Henry W. Donaldson
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED:
By: /s/ Scott K. Ginsburg
----------------------------------
Scott K. Ginsburg
For Moon Doggie Family Partnership
<PAGE>
EXHIBIT 4
WARRANT PURCHASE AGREEMENT
December 9, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. PURCHASE AND SALE OF THE WARRANT.........................................1
1.1. Sale and Issuance of the Warrant...................................1
1.2. Closing............................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................1
2.1. Authorization......................................................1
2.2. Valid Issuance of the Warrant......................................2
2.3. Offering...........................................................2
2.4. Non-Contravention..................................................2
2.5. Capitalization.....................................................3
2.6. Legal Proceedings..................................................3
2.7. No Violations......................................................3
2.8. Governmental Permits, Etc..........................................3
2.9. Financial Statements...............................................4
2.10. No Material Adverse Charge.........................................4
2.11. Additional Information.............................................4
2.12. Intellectual Property..............................................4
2.13. Listing............................................................4
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR...........................5
3.1. Authorization......................................................5
3.2. Purchase Entirely for Own Account..................................5
3.3. Investment Experience..............................................5
3.4. Accredited Investor................................................5
3.5. Restricted Securities..............................................5
3.6. Further Limitations on Disposition.................................5
3.7. Legends............................................................6
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING..........................6
4.1. Representations and Warranties.....................................7
4.2. Performance........................................................7
4.3. Qualifications.....................................................7
4.4. Proceedings and Documents..........................................7
4.5. Registration Rights Agreement......................................7
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.......................7
5.1. Representations and Warranties.....................................7
i
<PAGE>
5.2. Payment of Purchase Price..........................................7
5.3. Qualifications.....................................................7
6. MISCELLANEOUS............................................................7
6.1. Survival of Warranties.............................................7
6.2. Successors and Assigns.............................................8
6.3. Governing Law......................................................8
6.4. Counterparts.......................................................8
6.5. Titles and Subtitles...............................................8
6.6 Notices............................................................8
6.7. Finder's Fee.......................................................8
6.8. Expenses...........................................................8
6.9. Amendments and Waivers.............................................9
6.10. Severability.......................................................9
6.11. Corporate Securities Law...........................................9
6.12. Entire Agreement...................................................9
SCHEDULE A Schedule of Investors
EXHIBIT A Form of Warrant
EXHIBIT B Registration Rights Agreement
ii
<PAGE>
DIGITAL GENERATION SYSTEMS, INC.
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT is made as of the 9th day of December,
1998, by and among Digital Generation Systems, Inc., a California corporation
(the "Company"), and Moon Doggie Family Partnership (the "Investor").
WHEREAS, the Company desires to sell, and the Investor desires to
purchase for an aggregate purchase price of nine thousand four hundred ninety
dollars and forty-four cents ($9,490.44), a warrant, in the form attached hereto
as Exhibit A (the "Warrant"), to purchase one million four hundred sixty and
---------
sixty-seven (1,460,067) shares of the Company's Common Stock (the "Warrant
Shares") and with an exercise price equal three dollars and twenty-five cents
($3.25) (the "Purchase Price").
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF THE WARRANT.
--------------------------------
1.1. SALE AND ISSUANCE OF THE WARRANT.
--------------------------------
(a) On or prior to the Closing, the Company shall have authorized
(i) the sale and issuance to the Investor of the Warrant and
(iii) the issuance of the Warrant Shares to be issued upon
exercise of the Warrant.
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the Closing, and the Company
agrees to sell and issue to Investor at the Closing, a Warrant to
purchase the Warrant Shares, for the purchase price set forth
such Investor's name on Schedule A hereto.
----------
1.2. CLOSING.
-------
The purchase and sale of the Warrant shall take place at the offices
of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
155 Constitution Drive, Menlo Park, California, at 10:00 A.M., on December 9,
1998, or at such other time and place as the Company and the Investor mutually
agree upon orally or in writing (which time and place are designated as the
"Closing"). At the Closing the Company shall deliver to the Investor a Warrant
to purchase the Warrant Shares, against payment of the purchase price therefor
by check or wire transfer.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
---------------------------------------------
represents and warrants to the Investor that:
2.1. AUTHORIZATION.
-------------
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement and the Registration Rights Agreement, in the form
attached hereto as Exhibit B (the "Registration Rights Agreement"), the
---------
performance of all obligations of the Company hereunder and thereunder, and the
authorization, issuance (or reservation for issuance), sale and delivery of
<PAGE>
the Warrant being sold hereunder and the Warrant Shares issuable upon conversion
of the Warrant has been taken or will be taken prior to the Closing, and this
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Registration Rights Agreement may be limited by applicable federal or state
securities laws.
2.2 VALID ISSUANCE OF THE WARRANT.
-----------------------------
The Warrant that is being purchased by the Investor hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration Rights
Agreement and under applicable state and federal securities laws. The Warrant
Shares issuable upon conversion of the Warrant purchased under this Agreement
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Company's Amended and Restated Articles of
Incorporation, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Registration Rights Agreement and under applicable
state and federal securities laws. The Company agrees that, prior to the
expiration of the Warrant, the Company will at all time have authorized and
reserved, and will keep available, solely for issuance or delivery upon the
exercise of the Warrant, the number of shares of Common Stock as from time to
time shall be issuable upon the exercise of the Warrant.
2.3. OFFERING.
--------
Subject in part to the truth and accuracy of the Investor's
representations set forth in Section 3 of this Agreement, the offer, sale and
issuance of the Common Shares and the Warrants as contemplated by this Agreement
are exempt from the registration requirements of any applicable state and
federal securities laws, and neither the Company nor any authorized agent acting
on its behalf will take any action hereafter that would cause the loss of such
exemption.
2.4. NON-CONTRAVENTION.
-----------------
To the best of the Company's knowledge, the execution and delivery of
this Agreement and the Warrant, the issuance of the Warrant Shares to be issued
by the Company upon conversion of the Warrant, and the consummation of the
transactions contemplated hereby will not conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, any
material agreement or instrument to which the Company is a party or by which it
is bound or the Articles of Incorporation (the "Charter") or the Bylaws of the
Company nor result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the material
properties or assets of the Company or an acceleration of indebtedness pursuant
to any obligation, agreement or condition contained in any material bond,
debenture, note or any other evidence of indebtedness or any material indenture,
mortgage, deed of trust or any either agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
property or assets
2
<PAGE>
of the Company is subject, nor conflict with, or result in a violation of, any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body in the United States, other than with respect to "blue sky" laws, is
required for the valid issuance and sale of the Warrant and the Warrant Shares
to be issued pursuant to this Agreement (other than such as have been made or
obtained).
2.5. CAPITALIZATION.
--------------
All documents that the Company was required to file under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), during the
twelve (12) months preceding the date of this Agreement (the "SEC Filings")
accurately reflected the capitalization of the Company as of their respective
filing or effective dates, as the case may be. The Warrant Shares and the
shares of Common Stock of the Company issuable upon conversion of that certain
Warrant No. 2 to Purchase Common Stock of even date herewith issued to the
Investor (together, the "Combined Shares") represent greater than fifty percent
(50%) of the sum of (a) the Combined Shares and (b) the number of shares of
Common Stock of the Company issuable upon exercise of those warrants issued
pursuant to that certain Common Stock and Warrant Purchase Agreement of even
date herewith, by and among the Company and certain investors.
2.6. LEGAL PROCEEDINGS.
-----------------
Except as disclosed in the SEC Filings, there is no material legal or
governmental proceeding pending or, to the knowledge of the Company, threatened
or contemplated to which the Company is or may be a party or of which the
business or property of the Company is or may be subject.
2.7. NO VIOLATIONS.
-------------
Except as disclosed in the SEC Filings, the Company is not in
violation of its Charter or Bylaws, in violation of any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company, which violation, individually or
in the aggregate, would have a material adverse effect on the business or
financial condition of the Company, or in default in any material respect in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which the Company is bound or by which the properties
of the Company are bound or affected, which default, individually or in the
aggregate, would have a material adverse effect on the business or financial
condition of the Company or which would otherwise have a material adverse effect
on the Investor, and there exists no condition which, with the passage of time
or the giving of notice or both, would constitute a material default under any
such document or instrument or result in the imposition of any material penalty
or the acceleration of any indebtedness.
2.8 GOVERNMENTAL PERMITS, ETC.
-------------------------
Except as disclosed in the SEC Filings, the Company has all necessary
franchises, licenses, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department, or body
that are currently necessary for the operation of the business of the Company as
currently conducted, the absence of which would have a material adverse effect
on the business or operations of the Company.
3
<PAGE>
2.9. FINANCIAL STATEMENTS.
--------------------
Except as disclosed in the SEC Filings, the financial statements of
the Company and the related notes contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 and its Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998, present fairly the
financial position of the Company as of the dates indicated therein and its
results of operations and cash flows for the periods therein specified. Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified.
2.10. NO MATERIAL ADVERSE CHARGE.
--------------------------
Except as disclosed in the SEC Filings, since September 30, 1998,
there has not been any material adverse change in its business, financial
condition or results of operations.
2.11. ADDITIONAL INFORMATION.
----------------------
The Company has filed in a timely manner all SEC Filings. The SEC
Filings complied in all material respects with the requirements of the Exchange
Act or the Securities Act of 1933, as amended (the "Securities Act"), as the
case may be, as of their respective filing or effective dates, and the
information contained therein was true and correct in all material respects as
of the date or effective date of such documents, and each of the SEC Filings, as
of such date, did not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.12. INTELLECTUAL PROPERTY.
---------------------
Except to the extent that the failure to comply with any of the
following statements would not have a material adverse effect on the business or
operations of the Company, the Company hereby represents and warrants that as of
the date hereof:
(a) the Company has the right to use all intellectual property (the
"Intellectual Property") now used by it in its business;
(b) the Company owns all right, title and interest in and to, all of
the intellectual property it owns, free and clear of any liens
or encumbrances;
(c) in any case in which the Company does not own Intellectual
Property, it has good and valid licenses for the same which are
in full force and effect; and
(d) no claims have been asserted with respect to the use of any such
Intellectual Property or challenging or questioning the validity
or effectiveness of any such license or agreement.
2.13. LISTING.
-------
The Company shall use its best efforts to comply with all
requirements of the National Association of Securities Dealers, Inc. with
respect to the issuance of the Warrant Shares and the listing of the Warrant
Shares on the Nasdaq National Market.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
----------------------------------------------
represents and warrants that:
3.1. AUTHORIZATION.
-------------
Such Investor has full power and authority to enter into this
Agreement and the Registration Rights Agreement, and each such Agreement
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Registration Rights Agreement may be limited by applicable federal or state
securities laws.
3.2. PURCHASE ENTIRELY FOR OWN ACCOUNT.
---------------------------------
This Agreement is made with such Investor in reliance upon such
Investor's representation to the Company, which by such Investor's execution of
this Agreement such Investor hereby confirms, that the Warrant to be received by
such Investor and the Warrant Shares issuable upon exercise of the Warrant to be
received by such Investor (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, such Investor
further represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
3.3. INVESTMENT EXPERIENCE.
---------------------
Such Investor is an investor in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Warrant. If other than an individual, Investor
also represents it has not been organized for the purpose of acquiring the
Warrant.
3.4. ACCREDITED INVESTOR.
-------------------
Such Investor is an "accredited investor" within the meaning of
Securities and Exchange Commission ("SEC") Rule 501 of Regulation D, as
presently in effect.
3.5. RESTRICTED SECURITIES.
---------------------
Such Investor understands that the Securities it is purchasing are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act, only in
certain limited circumstances. In this connection, such Investor represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Act.
3.6. FURTHER LIMITATIONS ON DISPOSITION.
----------------------------------
Without in any way limiting the representations set forth above, such
Investor further agrees not to make any disposition of all or any portion of the
Securities unless and until the transferee has agreed in writing for the benefit
5
<PAGE>
of the Company to be bound by this Section 3 and the Registration Rights
Agreement provided and to the extent this Section 3 and such agreement are then
applicable, and:
(a) There is then in effect a Registration Statement under the
Securities Act of 1933, as amended, covering such proposed
disposition and such disposition is made in accordance with such
Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by the Company,
such Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such shares under
the Act. It is agreed that the Company will not require opinions
of counsel for transactions made pursuant to SEC Rule 144 except
in unusual circumstances.
(c) Notwithstanding the provisions of Paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor that is a partnership to
a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or the transfer by gift,
will or intestate succession of any partner to his or her spouse
or to the siblings, lineal descendants or ancestors of such
partner or his or her spouse, if the transferee agrees in writing
to be subject to the terms hereof to the same extent as if he or
she were an original Investor hereunder.
3.7 LEGENDS.
-------
It is understood that the certificates evidencing the Securities may
bear one or all of the following legends:
(a) "These securities have not been registered under the Securities
Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act
or an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to Rule 144
of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California
Corporations Code.
(c) Any legend required by applicable blue sky law.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of the
-----------------------------------------------
Investor under Section 1 of this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions:
6
<PAGE>
4.1. REPRESENTATIONS AND WARRANTIES.
------------------------------
The representations and warranties of the Company contained in Section
2 shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
4.2. PERFORMANCE.
-----------
The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing.
4.3. QUALIFICATIONS.
--------------
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
4.4. PROCEEDINGS AND DOCUMENTS.
-------------------------
All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to Investor's special
counsel, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
4.5. REGISTRATION RIGHTS AGREEMENT.
-----------------------------
The Company and the Investor shall have entered into the Registration
Rights Agreement.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of the
--------------------------------------------------
Company to the Investor under this Agreement are subject to the fulfillment on
or before the Closing of each of the following conditions by that Investor:
5.1. REPRESENTATIONS AND WARRANTIES.
------------------------------
The representations and warranties of the Investor contained in
Section 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2. PAYMENT OF PURCHASE PRICE.
-------------------------
The Investor shall have delivered the purchase price specified in
Section 1.1.
5.3. QUALIFICATIONS.
--------------
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
6. MISCELLANEOUS.
-------------
6.1. SURVIVAL OF WARRANTIES.
----------------------
The warranties, representations and covenants of the Company and the
Investor contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the Investor or the Company.
7
<PAGE>
6.2. SUCCESSORS AND ASSIGNS.
----------------------
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any Securities).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
6.3. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.4. COUNTERPARTS.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.5. TITLES AND SUBTITLES.
--------------------
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.6. NOTICES.
-------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified, deposit with a nationally
recognized overnight courier, confirmed facsimile or upon deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
6.7. FINDER'S FEE.
------------
Each party represents that it neither is nor will be obligated for any
finders' fee or commission in connection with this transaction. The Investor
agrees to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible.
The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.8. EXPENSES.
--------
Irrespective of whether the Closing is effected, each party shall pay
all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement. If any action at law or
in equity is necessary to enforce or interpret the terms of this Agreement, the
Warrant or the Registration Rights Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8
<PAGE>
6.9. AMENDMENTS AND WAIVERS.
----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of (a) the Company and (b) the Investor. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
6.10. SEVERABILITY.
------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.11. CORPORATE SECURITIES LAW.
------------------------
THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
6.12. ENTIRE AGREEMENT.
----------------
This Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DIGITAL GENERATION SYSTEMS, INC.
By: /s/ Henry W. Donaldson
-------------------------------------
Henry W. Donaldson,
President and Chief Executive Officer
Address: 875 Battery Street
San Francisco, CA 94111
INVESTOR:
/s/ Scott K. Ginsburg for Moon Doggie
-------------------------------------
Family Partnership
------------------
Scott K. Ginsburg
Address: 17340 Club Hill Drive
Dallas, Texas 75248
10
<PAGE>
SCHEDULE A
----------
SCHEDULE OF INVESTORS
---------------------
NAME AND ADDRESS PURCHASE PRICE
- ---------------- --------------
OF WARRANT
----------
Moon Doggie Family Partnership $9,490.44
<PAGE>
EXHIBIT A
---------
Form of Warrant
<PAGE>
EXHIBIT B
---------
Registration Rights Agreement
<PAGE>
EXHIBIT 5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT NO. 1 TO PURCHASE COMMON STOCK
OF
DIGITAL GENERATION SYSTEMS, INC.
VOID AFTER DECEMBER 9, 2001
This Warrant is issued to Moon Doggie Family Partnership, or its
registered assigns ("Holder") by Digital Generation Systems, Inc., a California
corporation (the "Company"), on December 9, 1998 (the "Warrant Issue Date").
This Warrant is issued pursuant to the terms of that certain Warrant Purchase
Agreement dated as of the date hereof (the "Purchase Agreement").
1. Purchase Shares. Subject to the terms and conditions hereinafter
---------------
set forth and set forth in the Purchase Agreement, the Holder is entitled, upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the holder hereof in writing), to
purchase from the Company up to one million four hundred sixty thousand sixty-
seven (1,460,067) fully paid and nonassessable shares of Common Stock of the
Company, as constituted on the Warrant Issue Date (the "Common Stock"). The
number of shares of Common Stock issuable pursuant to this Section 1 (the
"Shares") shall be subject to adjustment pursuant to Section 8 hereof.
2. Exercise Price. The purchase price for the Shares shall be $3.25,
--------------
as adjusted from time to time pursuant to Section 8 hereof (the "Exercise
Price").
3. Exercise Period. This Warrant shall not be exercisable prior to
---------------
December 9, 1999. Thereafter, this Warrant shall be exercisable as follows:
(a) This Warrant shall be exercisable with respect to 50% of the
Shares, in whole or in part with respect to such Shares, during the term
commencing on the date that the closing price of the Company's Common Stock on
the Nasdaq National Market has exceeded $10.00 per share for at least twenty
(20) of the preceding thirty (30) consecutive trading days and ending on 5:00
p.m. on December 9, 2001.
<PAGE>
(b) This Warrant shall become exercisable with respect to the
remaining Shares, in whole or in part, during the term commencing on the date
that the closing price of the Company's Common Stock on the Nasdaq National
Market has exceeded $15.00 per share for at least twenty (20) of the preceding
thirty (30) consecutive trading days and ending on 5:00 p.m. on December 9,
2001.
4. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed
copy of the form of Notice of Election attached hereto, to the Secretary of the
Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Assumption of Warrant. If at any time, while this Warrant, or any
---------------------
portion thereof, is outstanding and unexpired there shall be (i) an acquisition
of the Company by another entity by means of a merger, consolidation, or other
transaction or series of related transactions resulting in the exchange of the
outstanding shares of the Company's Capital Stock such that shareholders of the
Company prior to such transaction own, directly or indirectly, less than 50% of
the voting power of the surviving entity, or (ii) a sale or transfer of all or
substantially all of the Company's assets to any other person, then, as a part
of such acquisition, sale or transfer, lawful provision shall be made so that
the Holder shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of the Exercise
Price then in effect, the number of shares of stock or other securities or
property of the successor corporation resulting from such acquisition, sale or
transfer which a holder of the shares deliverable upon exercise of this Warrant
would have been entitled to receive in such acquisition, sale or transfer if
this Warrant had been exercised immediately before such acquisition, sale or
transfer, all subject to further adjustment as provided in this Section 5; and,
in any such case, appropriate adjustment (as determined by the Company's Board
of Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the Holder to the
end that the provisions set forth herein (including provisions with respect to
changes in and other adjustments of the number of Shares of the Holder is
entitled to purchase) shall thereafter be applicable, as nearly as possible, in
relation to any shares of Common Stock or other securities or other property
thereafter deliverable upon the exercise of this Warrant.
6. Certificates for Shares. Upon the exercise of the purchase rights
-----------------------
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within thirty (30) days of
the delivery of the subscription notice.
2
<PAGE>
7. Issuance of Shares. The Company covenants that the Shares, when
------------------
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of
-------------------------------------------------
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
----------------------------------------------
Company shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock or Common Stock as a dividend with respect
to any shares of its Common Stock, the number of Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
--------------------------------------------------
of any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant, the kind and amount of shares
of stock and other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of
shares of Common Stock as were purchasable by the Holder immediately prior to
such reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the purchase price per
share payable hereunder, provided the aggregate purchase price shall remain the
same.
(c) Notice of Adjustment. When any adjustment is required to be
--------------------
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional
3
<PAGE>
shares the Company shall make a cash payment therefor on the basis of the
Exercise Price then in effect.
10. No Shareholder Rights. Prior to exercise of this Warrant, the
---------------------
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of shareholder meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the Company.
However, nothing in this Section 10 shall limit the right of the Holder to be
provided the Notices required under this Warrant or the Purchase Agreement.
11. Transfers of Warrant. Subject to compliance with applicable
--------------------
federal and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed, to the
Company at its principal offices, and the payment to the Company of all transfer
taxes and other governmental charges imposed on such transfer. In the event of
a partial transfer, the Company shall issue to the holders one or more
appropriate new warrants.
12. Successors and Assigns. The terms and provisions of this Warrant
----------------------
and the Purchase Agreement shall inure to the benefit of, and be binding upon,
the Company and the Holders hereof and their respective successors and assigns.
13. Amendments and Waivers. Any term of this Warrant may be amended
----------------------
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.
14. Notices. All notices required under this Warrant and shall be
-------
deemed to have been given or made for all purposes (i) upon personal delivery,
(ii) upon confirmation receipt that the communication was successfully sent to
the applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing). Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at such other place
as the Holder shall notify the Company hereof in writing).
15. Attorneys' Fees. If any action of law or equity is necessary to
---------------
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
4
<PAGE>
16. Captions. The section and subsection headings of this Warrant
--------
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.
17. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
[remainder of page intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, Digital Generation Systems, Inc. caused this
Warrant to be executed by an officer thereunto duly authorized.
DIGITAL GENERATION SYSTEMS, INC.
By: /s/ Henry W. Donaldson
------------------------------------
Henry W. Donaldson,
President and Chief Executive Officer
SIGNATURE PAGE TO WARRANT NO. 1 TO PURCHASE COMMON STOCK
OF DIGITAL GENERATION SYSTEMS, INC.
<PAGE>
NOTICE OF EXERCISE
------------------
To: DIGITAL GENERATION SYSTEMS, INC.
The undersigned hereby elects to purchase _________________ shares of
Common Stock of Digital Generation Systems, Inc., pursuant to the terms of the
attached Warrant and payment of the Exercise Price per share required under such
Warrant accompanies this notice.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
By:
-------------------------------
Moon Doggie Family Partnership
Address:
-----------------------------------
-----------------------------------
Date:
--------------
Name in which shares should be registered:
- ------------------------------------------
<PAGE>
EXHIBIT 6
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT.
WARRANT NO. 2 TO PURCHASE COMMON STOCK
OF
DIGITAL GENERATION SYSTEMS, INC.
VOID AFTER DECEMBER 9, 2003
This Warrant is issued to Moon Doggie Family Partnership, or its
registered assigns ("Holder") by Digital Generation Systems, Inc., a California
corporation (the "Company"), on December 9, 1998 (the "Warrant Issue Date").
1. Purchase Shares. Subject to the terms and conditions hereinafter
---------------
set forth, the Holder is entitled, upon surrender of this Warrant at the
principal office of the Company (or at such other place as the Company shall
notify the holder hereof in writing), to purchase from the Company up to one
million five hundred forty-eight thousand four hundred sixty (1,548,460) fully
paid and nonassessable shares of Common Stock of the Company, as constituted on
the Warrant Issue Date (the "Common Stock"). The number of shares of Common
Stock issuable pursuant to this Section 1 (the "Shares") shall be subject to
adjustment pursuant to Section 10 hereof.
2. Exercise Price. The purchase price for the Shares shall be $3.25,
--------------
as adjusted from time to time pursuant to Section 10 hereof (the "Exercise
Price").
3. Exercise Period. This Warrant shall not be exercisable prior to
---------------
December 9, 1999. Thereafter, this Warrant shall be exercisable as follows:
(a) This Warrant shall be exercisable only with respect to that
portion of Shares that have vested (the "Vested Shares"), subject to the other
restrictions in this Section 3. The Shares shall vest in equal monthly
installments upon Scott K. Ginsburg's completion of each of the twenty-four (24)
months of continuous Service measured from and after the Warrant Issue Date.
<PAGE>
(b) In the event that the Company is subject to a Change in
Control on or after June 9, 1999, all of the Shares that have not yet vested
shall immediately vest and become Vested Shares.
(c) This Warrant shall be exercisable for up to seven hundred
seventy-four thousand two hundred thirty (774,230) of the Vested Shares, in
whole or in part with respect to such Vested Shares, during the term commencing
on the date that the closing price of the Company's Common Stock on the Nasdaq
National Market has exceeded $10.00 per share for at least twenty (20) of the
preceding thirty (30) consecutive trading days and ending on 5:00 p.m. on
December 9, 2003. This Warrant shall not be exercisable, at any time, with
respect to any of the Shares that are not Vested Shares.
(d) This Warrant shall become exercisable with respect to all of
the Vested Shares, in whole or in part, during the term commencing on the date
that the closing price of the Company's Common Stock on the Nasdaq National
Market has exceeded $15.00 per share for at least twenty (20) of the preceding
thirty (30) consecutive trading days and ending on 5:00 p.m. on December 9,
2003. This Warrant shall not be exercisable, at any time, with respect to any of
the Shares that are not Vested Shares.
(e) Notwithstanding paragraphs (a), (b), (c) and (d) of this
Section 3, in the event that Mr. Ginsburg has provided continuous Service to the
Company from the Warrant Issue Date through November 8, 2003 (the "End Vesting
Date"), this Warrant shall become exercisable with respect to all of the Shares
as of the End Vesting Date.
4. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Holder that:
(a) Authorization. All corporate action on the part of the
-------------
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Warrant and that certain
Registration Rights Agreement of even date herewith, by and between the Company
and certain investors (the "Registration Rights Agreement"), the performance of
all obligations of the Company hereunder and thereunder, and the authorization,
issuance (or reservation for issuance), and delivery of this Warrant and the
Shares issuable upon conversion of this Warrant has been taken or will be taken
prior to the date hereof, and this Warrant and the Registration Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
(b) Valid Issuance. This Warrant, when issued, sold and
--------------
delivered in accordance with the terms set forth herein and in consideration for
the Service provided by the Holder, will be duly and validly issued, fully paid,
and nonassessable, and will be free of
2
<PAGE>
restrictions on transfer other than restrictions on transfer under this Warrant
and the Registration Rights Agreement and under applicable state and federal
securities laws. The Shares issuable upon conversion of this Warrant have been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Company's Amended and Restated Articles of Incorporation, will be
duly and validly issued, fully paid, and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this Warrant
and the Registration Rights Agreement and under applicable state and federal
securities laws. The Company agrees that, prior to the expiration of this
Warrant, the Company will at all time have authorized and reserved, and will
keep available, solely for issuance or delivery upon the exercise of this
Warrant, the number of shares of Common Stock as from time to time shall be
issuable upon the exercise of this Warrant.
(c) Offering. Subject in part to the truth and accuracy of the
--------
Holder's representations set forth in Section 5 of this Warrant, the offer, sale
and issuance of this Warrant is exempt from the registration requirements of any
applicable state and federal securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
(d) Non-Contravention. To the best of the Company's knowledge,
-----------------
the execution and delivery of this Warrant, the issuance of the Shares to be
issued by the Company upon conversion of this Warrant, and the consummation of
the transactions contemplated hereby will not conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, any
material agreement or instrument to which the Company is a party or by which it
is bound or the Articles of Incorporation (the "Charter") or the Bylaws of the
Company nor result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the material
properties or assets of the Company or an acceleration of indebtedness pursuant
to any obligation, agreement or condition contained in any material bond,
debenture, note or any other evidence of indebtedness or any material indenture,
mortgage, deed of trust or any either agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, nor conflict with, or result in a
violation of, any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority applicable to the
Company. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body in the United States, other than with respect to "blue
sky" laws, is required for the valid issuance of this Warrant or the Shares to
be issued upon conversion of this Warrant (other than such as have been made or
obtained).
(e) Capitalization. All documents that the Company was required
--------------
to file under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during the twelve (12) months preceding the date of this Warrant (the
"SEC Filings") accurately reflected the capitalization of the Company as of
their respective filing or effective dates, as the case may be. The Shares and
the shares of Common Stock issuable upon conversion of that certain Warrant No.
1 to Purchase Common Stock of even date herewith issued to the Holder (together,
3
<PAGE>
the "Combined Shares") represent greater than fifty percent (50%) of the sum of
(a) the Combined Shares and (b) the number of shares of Common Stock of the
Company issuable upon exercise of those warrants issued pursuant to that certain
Common Stock and Warrant Purchase Agreement of even date herewith, by and among
the Company and certain investors.
(f) Legal Proceedings. Except as disclosed in the SEC Filings,
-----------------
there is no material legal or governmental proceeding pending or, to the
knowledge of the Company, threatened or contemplated to which the Company is or
may be a party or of which the business or property of the Company is or may be
subject.
(g) No Violations. Except as disclosed in the SEC Filings, the
-------------
Company is not in violation of its Charter or Bylaws, in violation of any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company, or in default in
any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness in any indenture, mortgage, deed of trust or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
by which the properties of the Company are bound or affected, which default,
individually or in the aggregate, would have a material adverse effect on the
business or financial condition of the Company or which would have otherwise
have a material adverse effect on the Holder, and there exists no condition
which, with the passage of time or the giving of notice or both, would
constitute a material default under any such document or instrument or result in
the imposition of any material penalty or the acceleration of any indebtedness.
(h) Governmental Permits, Etc. Except as disclosed in the SEC
-------------------------
Filings, the Company has all necessary franchises, licenses, certificates and
other authorizations from any foreign, federal, state or local government or
governmental agency, department, or body that are currently necessary for the
operation of the business of the Company as currently conducted, the absence of
which would have a material adverse effect on the business or operations of the
Company.
(i) Financial Statements. Except as disclosed in the SEC
--------------------
Filings, the financial statements of the Company and the related notes contained
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 and its Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, present fairly the financial position of the Company as of the dates
indicated therein and its results of operations and cash flows for the periods
therein specified. Such financial statements (including the related notes) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods therein specified.
(j) No Material Adverse Charge. Except as disclosed in the SEC
--------------------------
Filings, since September 30, 1998, there has not been any material adverse
change in its business, financial condition or results of operations.
4
<PAGE>
(k) Additional Information. The Company has filed in a timely
----------------------
manner all SEC Filings. The SEC Filings complied in all material respects with
the requirements of the Exchange Act or the Securities Act of 1933, as amended
(the "Securities Act"), as the case may be, as of their respective filing or
effective dates, and the information contained therein was true and correct in
all material respects as of the date or effective date of such documents, and
each of the SEC Filings, as of such date, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Intellectual Property. Except to the extent that the failure
---------------------
to comply with any of the following statements would not have a material adverse
effect on the business or operations of the Company, the Company hereby
represents and warrants that as of the date hereof:
(1) the Company has the right to use all intellectual property
(the "Intellectual Property") now used by it in its business;
(2) the Company owns all right, title and interest in and to,
all of the intellectual property it owns, free and clear of any liens or
encumbrances;
(3) in any case in which the Company does not own Intellectual
Property, it has good and valid licenses for the same which are in full force
and effect; and
(4) no claims have been asserted with respect to the use of
any such Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement.
(m) Listing. The Company shall use its best efforts to comply
-------
with all requirements of the National Association of Securities Dealers, Inc.
with respect to the issuance of the Shares and the listing of the Shares on the
Nasdaq National Market.
5. Representations and Warranties of the Holder. The Holder hereby
--------------------------------------------
represents and warrants that:
(a) Authorization. Such Holder has full power and authority to
-------------
acknowledge and enter into this Warrant and the Registration Rights Agreement,
and this Warrant and the Registration Rights Agreement constitute valid and
legally binding obligation, enforceable in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities laws.
5
<PAGE>
(b) Purchase Entirely for Own Account. This Warrant is issued
---------------------------------
to such Holder in reliance upon such Holder's representation to the Company,
which by such Holder's acknowledgement of this Warrant such Holder hereby
confirms, that this Warrant and the Shares issuable upon exercise of this
Warrant to be received by such Holder (collectively, the "Securities") will be
acquired for investment for such Holder's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By acknowledging this
Warrant, such Holder further represents that such Holder does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
(c) Investment Experience. Such Holder is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in this Warrant. If
other than an individual, Holder also represents it has not been organized for
the purpose of acquiring this Warrant.
(d) Accredited Investor. Such Holder is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
(e) Restricted Securities. Such Holder understands that the
---------------------
Securities it is being issued are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such Holder
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
(f) Further Limitations on Disposition. Without in any way
----------------------------------
limiting the representations set forth above, such Holder further agrees not to
make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 5 and the Registration Rights Agreement provided and to the
extent this Section 5 and such agreement are then applicable, and:
(1) There is then in effect a Registration Statement under the
Securities Act of 1933, as amended, covering such proposed disposition and such
disposition is made in accordance with such Registration Statement; or
(2) (i) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares
6
<PAGE>
under the Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to SEC Rule 144 except in unusual
circumstances.
(3) Notwithstanding the provisions of Paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Holder that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were an original Holder hereunder.
(g) Legends. It is understood that the certificates evidencing
-------
the Securities may bear one or all of the following legends:
(1) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(2) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.
(3) Any legend required by applicable blue sky law.
6. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed
copy of the form of Notice of Election attached hereto, to the Secretary of the
Company at its principal offices; and
(b) the payment to the Company of an amount equal to the aggregate
Exercise Price for the number of Shares being purchased.
7. Assumption of Warrant. If at any time, while this Warrant, or any
---------------------
portion thereof, is outstanding and unexpired there shall be (i) an acquisition
of the Company by another entity by means of a merger, consolidation, or other
transaction or series of related transactions resulting in the exchange of the
outstanding shares of the Company's Capital Stock such that shareholders of the
Company prior to such transaction own, directly or indirectly, less than 50% of
the voting power of the surviving entity, or (ii) a sale or transfer of all or
substantially all of the Company's assets to any other person, then, as a part
of such acquisition, sale or transfer,
7
<PAGE>
lawful provision shall be made so that the Holder shall thereafter be entitled
to receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
acquisition, sale or transfer which a holder of the shares deliverable upon
exercise of this Warrant would have been entitled to receive in such
acquisition, sale or transfer if this Warrant had been exercised immediately
before such acquisition, sale or transfer, all subject to further adjustment as
provided in this Section 7; and, in any such case, appropriate adjustment (as
determined by the Company's Board of Directors) shall be made in the application
of the provisions herein set forth with respect to the rights and interests
thereafter of the Holder to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
number of Shares of the Holder is entitled to purchase) shall thereafter be
applicable, as nearly as possible, in relation to any shares of Common Stock or
other securities or other property thereafter deliverable upon the exercise of
this Warrant.
8. Certificates for Shares. Upon the exercise of the purchase rights
-----------------------
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within thirty (30) days of
the delivery of the subscription notice.
9. Issuance of Shares. The Company covenants that the Shares, when
------------------
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
10. Adjustment of Exercise Price and Number of Shares. The number of
-------------------------------------------------
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
----------------------------------------------
Company shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock or Common Stock as a dividend with respect
to any shares of its Common Stock, the number of Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 10(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
--------------------------------------------------
of any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 10(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its
8
<PAGE>
successor shall be delivered to the Holder, so that the Holder shall have the
right at any time prior to the expiration of this Warrant to purchase, at a
total price equal to that payable upon the exercise of this Warrant, the kind
and amount of shares of stock and other securities and property receivable in
connection with such reclassification, reorganization, or change by a holder of
the same number of shares of Common Stock as were purchasable by the Holder
immediately prior to such reclassification, reorganization, or change. In any
such case appropriate provisions shall be made with respect to the rights and
interest of the Holder so that the provisions hereof shall thereafter be
applicable with respect to any shares of stock or other securities and property
deliverable upon exercise hereof, and appropriate adjustments shall be made to
the purchase price per share payable hereunder, provided the aggregate purchase
price shall remain the same.
(c) Notice of Adjustment. When any adjustment is required to be
--------------------
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
11. Withholding Taxes. In the event that the Company determines that
-----------------
it is required to withhold any tax as a result of the exercise of this Warrant,
the Holder, as a condition to the exercise of this Warrant, shall make
arrangements satisfactory to the Company to enable it to satisfy all withholding
requirements. The Holder and/or Mr. Ginsburg shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the vesting or disposition of Shares purchased
by exercising this Warrant.
12. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
13. No Shareholder Rights. Prior to exercise of this Warrant, the
---------------------
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of shareholder meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the Company.
However, nothing in this Section 13 shall limit the right of the Holder to be
provided the Notices required under this Warrant.
14. Transfers of Warrant. Subject to compliance with applicable
--------------------
federal and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed, to the
Company at its principal offices, and the payment to the Company of all transfer
taxes and other governmental charges imposed on such transfer. In the event of
a partial transfer, the Company shall issue to the holders one or more
appropriate new warrants.
9
<PAGE>
15. Successors and Assigns. The terms and provisions of this Warrant
----------------------
shall inure to the benefit of, and be binding upon, the Company and the Holders
hereof and their respective successors and assigns.
16. Amendments and Waivers. Any term of this Warrant may be amended
----------------------
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.
17. Notices. All notices required under this Warrant and shall be
-------
deemed to have been given or made for all purposes (i) upon personal delivery,
(ii) upon confirmation receipt that the communication was successfully sent to
the applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing). Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at such other place
as the Holder shall notify the Company hereof in writing).
18. Attorneys' Fees. If any action of law or equity is necessary to
---------------
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
19. Captions. The section and subsection headings of this Warrant
--------
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.
20. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
21. Definitions.
-----------
(a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time or, if a Committee has been appointed,
such Committee.
(b) "Change in Control" shall mean:
(1) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
persons who were not shareholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization 50% or
10
<PAGE>
more of the voting power of the outstanding securities of each of (A) the
continuing or surviving entity and (B) any direct or indirect parent corporation
of such continuing or surviving entity; or
(2) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Company" shall mean Digital Generation Systems, Inc., a
California corporation.
(e) "Consultant" shall mean an individual who performs bona fide
services for the Company, a Parent or a Subsidiary as a consultant or advisor,
excluding Employees and Outside Directors.
(f) "Employee" shall mean any individual who is a common-law
employee of the Company, a Parent or a Subsidiary.
(g) "Fair Market Value" shall mean the fair market value of a
Share, as determined by the Board of Directors in good faith. Such determination
shall be conclusive and binding on all persons.
(h) "Outside Director" shall mean a member of the Board of
Directors who is not an Employee.
(i) "Outside Director" shall mean a member of the Board of
Directors who is not an Employee.
(j) "Parent" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(l) "Service" shall mean service as an Employee, Outside Director
or Consultant.
11
<PAGE>
(m) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(n) "Warrant" shall mean this Warrant.
12
<PAGE>
IN WITNESS WHEREOF, Digital Generation Systems, Inc. caused this
Warrant to be executed by an officer thereunto duly authorized.
DIGITAL GENERATION SYSTEMS, INC.
By: /s/ Henry W. Donaldson
-------------------------------------
Henry W. Donaldson,
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED:
By:/s/ Scott K. Ginsburg for
-------------------------
Moon Doggie Family Partnership
------------------------------
Scott K. Ginsburg
13
<PAGE>
NOTICE OF EXERCISE
------------------
To: DIGITAL GENERATION SYSTEMS, INC.
The undersigned hereby elects to purchase _________________ shares of
Common Stock of Digital Generation Systems, Inc., pursuant to the terms of the
attached Warrant and payment of the Exercise Price per share required under such
Warrant accompanies this notice.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
By:
------------------------------
Moon Doggie Family Partnership
Address:
---------------------------------
---------------------------------
Date:
--------------
Name in which shares should be registered:
- ------------------------------------------
14
<PAGE>
Exhibit 7
JOINT FILING AGREEMENT
----------------------
In accordance with Rule 13d-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, the undersigned hereby agree to the joint
filing with all other Reporting Persons (as such term is defined in the Schedule
13D referred to below) on behalf of each of them of a statement on Schedule 13D
(including amendments thereto) with respect to the Common Stock of beneficial
interest, no par value per share, of Digital Generation Systems, a California
corporation, and that this Agreement may be included as an Exhibit to such joint
filing. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the 21st day of December 1998.
Scott K. Ginsburg
By: /s/ Scott K. Ginsburg
-----------------------------------
Moon Doggie Family Partnership, L.P.
By: /s/ Scott K. Ginsburg
-----------------------------------
Name: Scott K. Ginsburg
Title: General Partner
<PAGE>
Exhibit 8
Goldman, Sachs & Co. [GOLDMAN SACHS LOGO]
85 Broad Street
INDIVIDUAL ACCOUNT New York, NY 10004-2456
AGREEMENT 212-902-1000
- --------------------------------------------------------------------------------
Title of Account Account Number
Scott K. Ginsburg 012-07137-9
- --------------------------------------------------------------------------------
TO: GOLDMAN SACHS & CO.
This agreement sets forth our respective rights and obligations in connection
with your accepting a cash or margin account or accounts for the undersigned
("Client"). This agreement is in addition to (and in no way limits or restricts)
any of the provisions of or the rights which you or any of your affiliates may
have under any other agreements between you or any of your affiliates and
Client. You and Client hereby agree to the following with respect to any of
Client's accounts with you and all transactions with you:
1. EXCHANGE OR MARKET. All transactions under this agreement shall be in
- ----------------------
accordance with the rules and customs of the exchange or market and its clearing
house. If any, where the transactions are executed and in conformity with
applicable law and regulations of governmental authorities and future amendments
or supplements thereto.
2. GENERAL LIEN: DELIVERY OF COLLATERAL. Client agrees that all securities and
- ----------------------------------------
other property and the proceeds thereof, and any other obligations, whether or
not due, which you or any of your affiliates may hold for Client or which are,
or may become, due to Client (either individually or jointly with others or in
which Client has any interest) and all rights Client may have against your or
any of your affiliates shall be subject to a general lien, security interest and
right of set-off for the discharge of all Client's obligations to you or any of
your affiliates. Client further agrees that you may, in your discretion at any
time and from time to time, require Client to deliver collateral to margin and
secure Client's performance of obligations to you and your affiliates with
respect to margin and secure Client's performance of obligations to you and your
affiliates with respect to spot, forward, option, swap and other transactions
involving or relating to foreign exchange. Such collateral shall be delivered,
within one business day of your request, in such amount and form and to such
account or recipient as you shall specify. You may, in your discretion and
without notice to Client, deduct any amounts from Client's account and apply or
transfer any of Client's securities and other property interchangeably between
any of Client's accounts, each of which unreservedly guarantees all obligations
of Client. Client acknowledges that you and each of your affiliates act as
agents for each other in respect of the rights subject to lien as described
above.
3. PAYMENT AND SETTLEMENT. Client agrees that all cash account transactions will
- --------------------------
be handled on a cash basis and Client shall pay for any security purchased for
Client's account, and deliver any securities sold for Client's account on or
before the settlement date. Client agrees to pay on demand all balances owing
with respect to Client's account. Client warrants that no sale of securities is
contemplated before the securities are paid for as provided above and that each
item sold will be owned by Client at the time of sale.
4. DEFAULT. In the event of default by Client of any obligation under any
- -----------
transaction or agreement with your or any of your affiliates, if Client shall
become bankrupt, insolvent or subject to any bankruptcy, reorganization,
insolvency or similar proceeding, or if for any reason you or any of your
affiliates deem it advisable for your or their protection, you or any of your
affiliates may, without notice or demand to Client, and at such times and places
as you may determine, cancel., terminate, accelerate, liquidate and/or close-out
any or any transactions and agreements between Client and you or any of your
affiliates, pledge or sell any securities or other property which you or any of
your affiliates may hold for Client or which is due to Client (either
individually or jointly with others) and apply the proceeds to the discharge of
the obligation, set-off, net and recoup any obligations to Client against any
obligations to you or any of your affiliates, exercise all rights of a secured
creditor in respect of all collateral in which you or your affiliates have a
security interest or right of set-off, cover any open positions of Client (by
buying in or borrowing securities or otherwise) and take such other actions as
you or any of your affiliates deem appropriate provided that if applicable law
would stay or otherwise impair the ability of your or any of your affiliates to
take any such action upon any such bankruptcy, reorganization, insolvency or
similar proceeding, you and the applicable affiliate(s) will be deemed to have
taken such action with respect to the cancellation, termination, acceleration,
liquidation and/or close-out of transactions, and the application of appropriate
set-offs and if and to the extent you deem it appropriate, the sale or
disposition of securities or other assets of Client, the exercise of rights of a
secured creditor, and the application of proceeds immediately prior to such
bankruptcy, reorganization, insolvency or similar proceeding. Client shall
remain liable for any deficiency and shall promptly reimburse you and your
affiliates for any loss or expense incurred thereby, including losses sustained
by reason of an inability to borrow any securities or other property sold for
Client's account.
5. INTEREST, FEES. Client agrees to pay interest charges which may be imposed by
- ------------------
you in accordance with your usual custom, with respect to late payments in
conjunction with any transaction, including for securities purchased, in
Client's account and prepayments in Client's account (i.e., the crediting of the
proceeds of sale prior to settlement date or prior to receipt by you of the item
sold in good deliverable form). Client acknowledges receipt of the enclosed
document entitled "Interest Charges to Clients" and agrees to be bound thereby.
Client agrees to pay promptly any amount which may become due in order to meet
requests for additional deposits or marks to market with respect to any
transactions including unissued securities purchased or sold by Client. Client
agrees to pay promptly any custody or other fees which may be imposed by you
with respect to the account.
6. SALES ORDERS. Except as provided in the last sentence of this Section 6, the
- ----------------
giving of each sell order by Client shall constitute a designation of the sale
as "long" and a certification that the securities to be sold are owned by Client
and, if such securities are not in your possession, the placing of such order
shall constitute a warranty by Client that Client shall deliver such securities
to you on or before settlement date. If Client maintains a margin account,
Client agrees to designate all sell orders as either "long" or "short".
7. REPORTS, STATEMENTS. Reports or confirmations of the execution of orders and
- -----------------------
statements of Client's account shall be conclusive if not objected to in writing
within ten (10)) days after forwarding by you to Client by mail or otherwise.
Communications mailed, electronically transmitted or otherwise sent to Client at
the address specified in your records shall, until three (3) business days after
you have received notice in writing of a different address, be deemed to have
been forwarded by you when sent and the Client waives all claims resulting from
failure to receive such communications.
8. CUSTODIAL ARRANGEMENTS. If you act as custodian for the securities and other
- --------------------------
property in Client's account, you are authorized to register such securities in
your name or the name of your nominee, or cause such securities to be registered
in the name of, or in the name of the nominee of, a recognized depository or
clearing organization. Client understands that when you hold on Client's behalf
bonds or preferred stocks which are callable in part by the issuer, such
securities will be subject to your impartial lottery allocation system in which
the probability of Client's securities being selected as called is proportional
to the holdings of all clients of such securities held in bulk by or for your.
Client further understands that you will withdraw such securities from any
depository prior to the first date on which such securities may be called unless
such depository had adopted an impartial lottery system which is applicable to
all participants. Client may withdraw uncalled securities prior to a partial
call subject to compliance with applicable margin requirements and the terms of
any agreements between you and Client. You are authorized to withdraw securities
sold or otherwise disposed of, and to credit Client's account with the proceeds
thereof or make such other disposition thereof as Client may direct. Your are
further authorized to collect all income and other payments which my become due
on Client's securities, to surrender for payment maturing obligations and those
called for redemption and to exchange certificates in temporary form for like
certificates in definitive form, or, if the par value of any shares is changed,
to effect the exchange for new certificates. It is understood and agreed by
Client that although you will use reasonable efforts to effect the authorization
set forth in the preceding sentence, you will incur no liability for your
failure to effect the same.
9. TERMINATION. Client and you agree that the accounts maintained hereunder may
- ----------------
be terminated by you or Client at any time effective upon the giving of notice
of such termination to Client or to you, as the case may be. All applicable
provisions will survive the termination of the account and this agreement.
Without limiting the foregoing, upon any such termination, the provisions of
this agreement shall remain in effect with respect to all securities and other
property then held in such account or accounts and all transactions and
agreements then outstanding between Client and you or any of your affiliates.
10. ORDERS, RECOMMENDATIONS, BUNCHING. Client acknowledges that, on occasion,
- ---------------------------------------
you may not be in a position to make a recommendation or render an opinion with
respect to any security. Client agree that: i) you may, in your sole discretion
and without prior notice to Client, refuse to accept or execute any other from
Client and, in such case, you shall endeavor to give Client notice of such
refusal as soon as practical; ii) you may submit Client's orders jointly with
orders for other clients and you need not designate any of Client's eligible
orders as "individual" when submitting orders via the DOT system and; iii) the
average price for executions resulting from bunched orders will be assigned to
Client's account.
11. GOVERNING LAW, SUCCESSOR AND ASSIGNS, WAIVER. THIS AGREEMENT AND ITS
- --------------------------------------------------
ENFORCEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND ITS
PROVISIONS SHALL COVER INDIVIDUALLY AND COLLECTIVELY ALL ACCOUNTS WHICH CLIENT
MAY MAINTAIN WITH YOU. This agreement is binding upon and inures to the benefit
of you, your affiliates, Client, and our respective legal representatives,
successors and assigns. Neither you nor Client may assign its rights or delegate
its obligations under this agreement, in whole or in part, without the prior
written consent of the other party, except for an assignment and delegation by
you of all of your rights and obligations hereunder to a successor entity that
assumes substantially all of your assets and businesses (including all of the
obligations under this agreement) by contract, operation of law or otherwise and
that is a registered broker-dealer under relevant Securities and Exchange
Commission rules. Under any such delegation and assumption of obligations by
such successor entity, you shall be relieved of and fully discharged from all
your obligations hereunder, whether such obligations arose before or after the
date of such delegation and assumption. No waiver of any provision of this
agreement shall be deemed a waiver of any other provision, nor a continuing
waiver of the provision or provisions so waived. All waivers and modifications
must be in writing.
12. ARBITRATION
- ----------------
(A) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(b) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHTS TO A JURY TRIAL.
(c) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM
COURT PROCEEDINGS
(d) THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY. PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
(e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY CONTROVERSY BETWEEN YOU (TOGETHER WITH ANY OF YOUR AFFILIATES ALSO INVOLVED
IN SUCH CONTROVERSY) OR ANY OF YOUR OR THEIR MANAGING DIRECTORS, OFFICERS,
DIRECTORS OR EMPLOYEES ON THE ONE HAND, AND CLIENT OR CLIENT'S AGENTS ON THE
OTHER HAND, ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREBY, OR THE ACCOUNTS ESTABLISHED HEREUNDER, SHALL BE SETTLED BY
ARBITRATION, IN ACCORDANCE WITH THE RULES THEN OBTAINING OF ANY ONE OF THE
AMERICAN ARBITRATION ASSOCIATION OR THE NEW YORK STOCK EXCHANGE, INC., OR ANY
OTHER EXCHANGE OF WHICH YOU ARE A MEMBER, OR THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. OR THE MUNICIPAL SECURITIES RULEMAKING BOARD, AS CLIENT
MAY ELECT. IF CLIENT DOES NOT MAKE SUCH ELECTION BY REGISTERED MAIL ADDRESSED TO
YOU AT YOUR MAIN OFFICE WITHIN TEN (10) DAYS AFTER RECEIPT OF NOTIFICATION FROM
YOU REQUESTING SUCH ELECTION, THEN CLIENT AUTHORIZES YOU TO MAKE SUCH ELECTION
ON BEHALF OF CLIENT. THE AWARD OF THE ARBITRATOR SHALL BE FINAL, AND JUDGMENT
UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING
JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR
SEEK TO ENFORCE NAY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS
INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE
CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED
BY THE PUTATIVE CLASS ACTION UNTIL: (I) THE CLASS CERTIFICATION IS DENIED; (II)
THE CLASS IS DECERTIFIED; OR (II) THE CLIENT IS EXCLUDED FROM THE CLASS BY THE
COURT.
SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A
WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
13. CLIENT REPRESENTATION. Client represents that he or she is of legal age.
- ---------------------------
Client further represents that no one except the Client has an interest in
Client's account unless such interest is revealed in the title of such account
and in any such case, Client has the interest indicated in such title. Client
warrants that he or she will keep you informed of nay changes in the information
supplied to you herein or otherwise in connection with your establishing and
maintaining an account or accounts for Client.
- --------------------------------------------------------------------------------
GSIAA 8/97 PLEASE SEE REVERSE SIDE
<PAGE>
- -------------------------------------------------------------------------------
MARGIN
- -------------------------------------------------------------------------------
NO MARGIN ACCOUNT WILL BE ESTABLISHED FOR THE CLIENT UNLESS AND UNTIL THE
ACCOUNT IS APPROVED FOR MARGIN TRANSACTIONS BY GOLDMAN, SACHS & CO.
Please complete Section 14 ONLY IF CLIENT WISHES TO APPLY FOR A MARGIN ACCOUNT.
14. Margin. SECTION 14 APPLIES TO TRANSACTIONS EFFECTED IN A SECURITIES MARGIN
- ------------
ACCOUNT WHICH HAS BEEN ESTABLISHED BY YOU. THE PROVISIONS OF SECTION 14 ARE IN
ADDITION TO THE OTHER PROVISIONS CONTAINED IN THIS AGREEMENT.
a) Client represents and warrants to you that Client has had an opportunity to
discuss with you the risks associated with the use of margin and that the use of
margin is consistent with Client's investment objectives as supplied to you,
including, if applicable, the designation of safety of principal as Client's
primary investment objective.
b) Client agrees to maintain margins for Client's account as you may require
from time to time. Client agrees to pay interest charges which are imposed, in
accordance with your usual custom, with respect to Client's account and to pay
on demand any debit balance owing with respect to Client's account.
c) Client agrees that securities and other property in Client's account may be
carried in your general loans and may be pledged or hypothecated separately or
in common with other securities and any other property for the sum due to you
thereon or for a greater sum and without retaining in your possession and
control for delivery a like amount of similar securities or other property and
that certain rights of ownership, including the right to vote such securities,
may be transferred to you or by you to others.
BY SIGNING HERE, CLIENT INDICATES A DESIRE TO APPLY FOR A SECURITIES MARGIN
ACCOUNT, AGREES TO ABIDE BY ALL PROVISIONS IN SECTION 14, AND ACKNOWLEDGES THAT
CLIENT'S SECURITIES MAY BE LOANED TO GOLDMAN, SACHS & CO. OR TO OTHERS.
- -------------------------------------------------------------------------------
Signature: /S/ Scott K. Ginsburg Date: 7/10/98
- -------------------------------------------------------------------------------
SECTION 15-20 MUST BE COMPLETED BY THE CLIENT:
- -------------------------------------------------------------------------------
15. OCCUPATION OF CLIENT AND OTHERS. Check all applicable boxes and provide an
explanation below if Client is associated with any of the entities listed below,
or if an immediate family member of Client (spouse, brother, sister, parents,
children, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-
law, daughter-in-law), or other person, who supports Client to a material
extent, is associated with any of the following entities; an exchange;
[ ] a member or member organization of any exchange or the NASD or any broker-
dealer;
[ ] a bank, savings and loan institution, trust company, insurance company; or;
[ ] an investment company, an investment advisory firm or other institutional
investment entity.
Explanation:
-------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
16. INVESTMENT OBJECTIVES. While individual transactions may vary, Client's
investment objectives with respect to securities transactions are set forth
below. Such information does not apply to other transactions with your or with
any of your affiliates. PLEASE RANK ALL APPLICABLE OBJECTIVES IN ORDER OF
PREFERENCE ("1" INDICATES THE HIGHEST PREFERENCE, "5" INDICATES THE LOWEST
PREFERENCE)
3 GROWTH: Client is more interested in having the market value of the portfolio
- ---
grow over the long term than in current income from portfolio; Client is
prepared to accept additional risk to principal to achieve this growth.
4 INCOME: Client is more interested in obtaining a steady stream of current
- ---
income from the portfolio than in growth of the portfolio.
5 SAFETY OF PRINCIPAL: Client is interested primarily in preserving the value
- ---
of the account assets, and is willing to forego more growth or higher income.
1 TRADING PROFITS: Client wants to take advantage of short-term trading
- ---
opportunities, which may involve establishing and then liquidating positions
quickly.
2 SPECULATION: Client is interested in taking above-average risks to principal
- ---
in an attempt to achieve above-average returns.
The above information regarding my investment objectives represents my current
preference and supersedes any indications of such preferences that I may have
previously provided to you with respect to securities transactions other than
information specifically supplied with respect to options transactions.
17. FINANCIAL INFORMATION
- -------------------------
<TABLE>
<CAPTION>
$250,000 $ 500,000
Below to to Over
$250,000 $500,000 $1,000,000 $1,000,000
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Total Net Worth
(excluding residence) [ ] [ ] [ ] [X]
Annual Income [ ] [ ] [ ] [X]
Total Net Liquid Assets [ ] [ ] [ ] [X]
</TABLE>
18. PAYMENT AGREEMENT. You are authorized to rely on the payment instructions
- ----------------------
set forth below until written notice believed by you in good faith to be genuine
of any changes regarding such instructions is received by you. I addition, when
so instructed you may, but you are not required to, follow payment instructions
which differ from the instructions se forth below with respect to specified
transactions; proved, however, that only Client or a person with trading
authorization over Client's account may authorize the transfer of funds to an
account which is not in Client's name only.
PAYMENT INSTRUCTIONS
Name of Bank or Other Recipient:
- ------------------------------------------------------------------------------
Address:
- ------------------------------------------------------------------------------
Name of Account:
- ------------------------------------------------------------------------------
Account Number:
- ------------------------------------------------------------------------------
Contact Name and Telephone Number (if applicable):
- ------------------------------------------------------------------------------
The following persons are among those authorized to transfer funds:
19. ORDERS PLACED BY OTHERS. If you are authorizing someone to place orders on
- -----------------------------
your behalf, please indicate the person"s name below AND COMPLETE THE ENCLOSED
TRADING AUTHORIZATION.
20. DISCLOSURE TO ISSUERS. Client understands that you may be required to
- ---------------------------
disclose to securities issuers the name, address and securities positions with
respect to securities held in Client's account in your or your nominee's name
unless you are notified that Client objects, Client hereby notifies you that
Client wishes such disclosure to be made.
[ ] CLIENT SHOULD CHECK THIS BOX IF CLIENT DOES NOT CONSENT TO SUCH DISCLOSURE.
BY SIGNING BELOW, CLIENT ACKNOWLEDGES RECEIPT OF A COPY OF THIS INDIVIDUAL
ACCOUNT AGREEMENT. A PREDISPUTE ARBITRATION CLAUSE IS CONTAINED IN SECTION 12
HEREOF.
- -------------------------------------------------------------------------------
Signature: /S/ Scott K. Ginsburg Date: 7/10/98
- -------------------------------------------------------------------------------
Please Print Name: Scott K. Ginsburg
- -------------------------------------------------------------------------------
For Goldman, Sachs & Co. use only
- -------------------------------------------------------------------------------
Account Representative Receiving Account Manager Reviewing Account
/S/
- -------------------------------------------------------------------------------
Date 7/15/98 Date
- -------------------------------------------------------------------------------
ACCT/CL/PNC/101
<PAGE>
Goldman, Sachs & Co. [GOLDMAN
85 Broad Street SACHS
CUSTOMER'S OPTIONS New York, NY 10004-2456 LOGO]
AGREEMENT 212-902-10000
- --------------------------------------------------------------------------
Title of Account Account Number
Scott K. Ginsburg 012-07137-9
- --------------------------------------------------------------------------
TO: GOLDMAN, SACHS & CO.
IN CONSIDERATION OF YOUR ACTING FOR THE UNDERSIGNED ("CUSTOMER") IN CONNECTION
WITH THE PURCHASE AND SALE OF OPTIONS WHICH ARE LISTED ON ANY OPTIONS OR
SECURITIES EXCHANGE, CUSTOMER AGREES WITH YOU AS FOLLOWS:
1. All transactions under this agreement shall be in accordance with the rules
and customs of the exchange or market, and its clearing house. If any, where the
transactions are executed and in conformity with applicable law and regulations
of governmental authorities and future amendments or supplements thereto.
2. Customer has been informed that the rules of the various exchanges and other
regulatory organizations require that you obtain the information set forth
below. Customer agrees to keep you informed of any changes in the information
supplied
A) INVESTMENT OBJECTIVES FOR OPTIONS TRANSACTIONS (Number those applicable in
order of priority)
Growth (3) Income (4) Safety of Principal (5) Trading Profits (1)
Speculation (2) Other ( )
---------------------
B) EMPLOYMENT STATUS
Not employed [ ] Self employed [ ] Retired [ ] Name of Employer
-------
C) AGE 45 MARITAL STATUS Single NUMBER OF DEPENDENTS
------ ------- ------
D) ESTIMATED TOTAL ANNUAL INCOME
Less than $50,000 [ ] $50,000-$100,000 [ ]
$100,000-$250,000 [ ] $250,000+ [X]
E) ESTIMATED NET WORTH (Excluding Principal Family Residence)
Less than $100,000 [ ] $100,000-$250,000 [ ]
$250,000-$500,000 [ ] $500,000-$1,000,000+ [ ] $1,000,000+ [X]
F) ESTIMATED LIQUID NET WORTH (Cash, Securities, Other)
Less than $100,000 [ ] $100,000-$250,000 [ ]
$250,000-$500,000 [ ] $500,000-$1,000,000+ [ ] $1,000,000+ [X]
G) INVESTMENT EXPERIENCE OF ACCOUNT PRINCIPAL(S)
<TABLE>
<CAPTION>
Number Average No. Average
of Years of Trades Dollar Amount Type of Account Type(s) of
Trading Per Month Per Trade (One or ___) Previous Trading
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equities 10 5 200,000 [ ] Cash [X] Margin [X] Long [ ] Short
------------------------------------------------------------------------------------------
Bonds 6 mo. [X] Cash [ ] Margin [X] Long [ ] Short
------------------------------------------------------------------------------------------
Options [ ] Covered Writing
[ ] Uncovered Writing
0 [ ] Cash [ ] Margin [ ] Spreading
[ ] Buying [ ] Hedging
------------------------------------------------------------------------------------------
Commodities [ ] Long [ ] Short
0 [ ] Cash [ ] Margin [ ] Spreading
[ ] Hedging
------------------------------------------------------------------------------------------
Other (Specify) 0 [ ] Cash [ ] Margin [ ] Long [ ] Short
------------------------------------------------------------------------------------------
</TABLE>
H) INVESTMENT EXPERIENCE OF AGENT (if applicable)
<TABLE>
<CAPTION>
Number Average No.
of Years of Trades Type(s) of
Trading Per Month Previous Trading
---------------------------------------------------
<S> <C> <C> <C>
Equities [ ] Long [ ] Short
----------------------------------------------------------
Bonds [ ] Long [ ] Short
----------------------------------------------------------
Options [ ] Covered Writing
[ ] Uncovered Writing
[ ] Spreading
[ ] Buying [ ] Hedging
----------------------------------------------------------
Commodities [ ] Long [ ] Short
Spreading
Hedging
----------------------------------------------------------
Other (Specify) [ ] Long [ ] Short
----------------------------------------------------------
</TABLE>
Name of Authorized Party:
---------------------------------------------------
Relationship of Principal(s)
------------------------------------------------
CUSTOMER , OR WITH REFERENCE TO 2.H, HIS AGENT, HAS ACCURATELY PROVIDED THE
INFORMATION FURNISHED ABOVE. ANY INFORMATION NOT FURNISHED ABOVE IS EITHER
UNKNOWN OR THE CUSTOMER REFUSES TO FURNISH THE SAME.
3. Customer, acting alone or in concert with others agrees not to violate
directly or indirectly (through you as broker or otherwise), or contribute to
the violation of the position or exercise limits of the exchanges which are
summarized in the attached appendix.
4. This agreement is in addition to and does not replace, cancel or modify any
other agreement which Customer may have with you.
5. Customer hereby certifies that the current OCC options disclosure
document(s) have been received, read and are understood, including the material
on the risks of buying and selling listed options.
<PAGE>
6. WE AGREE TO THE PROVISIONS CONCERNING ARBITRATION SET FORTH BELOW.
(a) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(b) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO A JURY TRIAL.
(c) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM
THE COURT PROCEEDINGS.
(d) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
(e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR TO AFFILIATED WITH THE SECURITIES INDUSTRY.
Any controversy between you (together with any of your affiliates also involved
in such controversy) or any of your or their partners, officers, directors, or
employee s on the one hand, and Customer or Customers agents on the other hand,
arising out of or relating to the agreement, the transactions contemplated
hereby, or the accounts established hereunder, shall be settled by arbitration,
in accordance with the rules then obtaining of any one of the American
Arbitration Association or The New York Stock Exchange, Inc., or any other
exchange of which you are a member, or the National Association of Securities
Dealers, Inc., or The Municipal Securities Rulemaking Board, as Customer may
elect. If Customer does not make such election by registered mail addressed to
you at your main office within ten (10) days after receipt of notification from
you requesting such election, then Customer authorizes you to make such election
on behalf of Customer. The award of the arbitrator shall be final, and judgment
upon the award rendered may be entered in any court, state or federal, having
jurisdiction.
NO PERSONS SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR
SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT ASSIGN ANY PERSON WHO HAS
INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE
CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED
BY THE PUTATIVE CLASS ACTION UNTIL:
(I) THE CLASS CERTIFICATION IS DENIED;
(II) THE CLASS IS DECERTIFIED; OR
(III) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.
Such forbearance to endorse an agreement to arbitrate shall not constitute a
waiver of any rights under this agreement except to the extent stated herein.
7. Customer understands that exercise assignment notices for option contracts
are allocated among customer short positions pursuant to an automated procedure
which randomly selects from among all customer short option positions, including
positions established on the day of assignment, those contracts which are
subject to exercise. Customer further understands that all short positions in
American-style options are liable for assignment at any time. A more detailed
description of this random allocation procedure is available upon request.
BY SIGNING BELOW, CUSTOMER ACKNOWLEDGES RECEIPT OF A COPY OF THIS CUSTOMER'S
OPTIONS AGREEMENT. PREDISPUTE ARBITRATION CLAUSE IS CONTAINED IN PARAGRAPH 6
HEREOF.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Signature: /S/ Scott K. Ginsburg ADDITIONAL SIGNATURE (IF NECESSARY):
- ------------------------------------------------------------------------------------------------------------------------------------
Please Print Name Scott K. Ginsburg Please Print Name
- ------------------------------------------------------------------------------------------------------------------------------------
Date: 7/10/98 Date:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR GOLDMAN, SACHS & CO. USE ONLY
- ------------------------------------------------------------------------------------------------------------------------------------
Registered Representative Receiving Account: /S/ Registered Options Principal Approved:
- ------------------------------------------------------------------------------------------------------------------------------------
Date: 7/15/98 Date:
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
TRADING AUTHORIZATION Goldman, Sachs & Co. [GOLDMAN SACHS LOGO]
[FOR GOLDMAN SACHS REPRESENTATIVES] 85 Broad Street
New York, NY 10004-2456
212-902-1000
- -----------------------------------------------------------------------------------------------------------------------------------
Title of Account Account Number
Scott K. Ginsburg 012-07137-9
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
To: Goldman, Sachs & Co.
The undersigned hereby authorizes (print names of at least two Goldman
Sachs representatives):
1. Tim Weber
- ---------------------------------------------------------------------------
2. Kirk Rimer
- ---------------------------------------------------------------------------
3. Charlie McKinney
- ---------------------------------------------------------------------------
4.
- ---------------------------------------------------------------------------
and such other persons who are now or who may hereafter become members of
the same client team as the above-named persons, or their or their Goldman
Sachs designees, as his or her agent and attorney-in-fact, individually or
collectively, to buy, sell, trade, tender, exchange and otherwise deal in
stocks, bonds and any other forms of securities or instruments (including
short sales and other margin transactions if a margin account has been
applied for on behalf of the undersigned and approved, and puts, calls and
other options, if option approval has been applied for on behalf of the
undersigned and approved), if option approval has been applied for on
behalf other undersigned and approved), in accordance with Goldman Sachs'
policies governing discretionary accounts, for the undersigned's accounts
(the "Account").
While individual transactions may vary, my general investment objectives,
in order of preference, are as follows (please indicate the objectives
applicable to your Account, using "1" to indicate your highest preference
through "5" to indicate your lowest):
3 GROWTH (I am more interested in having the market value of my portfolio
grow over the long term than I am in current income for my portfolio; I
am prepared to accept additional risk to principal to achieve this growth.)
4 INCOME (I am more interested in obtaining steady stream of current
income from my portfolio than I am in growth of my portfolio.)
5 SAFETY OF PRINCIPAL (I am interested primarily in preserving the value
of my assets, and I am willing to forego more growth or higher income).
1 TRADING PROFITS (I want to take advantage of short-term trading
opportunities, which may involve establishing and then liquidating
positions quickly).
2 SPECULATION (I am interested in taking above-average risks to principal
in an attempt to achieve above-average returns).
The above information regarding my investment objectives represents my
current preference and supersedes any indications of such preferences that
I may previously have provided to Goldman Sachs other than information
specifically supplied with respect to options transactions. If margin
transactions are contemplated, I acknowledge that I have had an
opportunity to discuss with you the risks associated with the use of
margin and that the use of margins is consistent with my investment
objectives, including, if applicable, the designation of safety of
principal as my primary investment objective.
If the above information regarding my investment objectives changes,
at the time of such change I will orally advise the Goldman Sachs
representatives referred to above and, at the same time, I will
provide written notice of the change in investment objectives. You
are entitled to rely on the foregoing information and other
information which I have provided to you until your receipt of a
written notice of the change in such information.
I understand that, in accordance with Goldman Sachs' policies, the
following transactions will not be executed by you on a discretionary
basis:
(i) the purchase of securities where Goldman Sachs is a participant
in any registered public offering;
(ii) the purchase of debt securities which are unrated or which are
rated by either Moody's or S&P as below investment grade (Baa-1/BBB)
unless a) the debt securities have been pre-refunded with U.S.
Government or U.S. Government agency securities; b) the debt
securities appear in the High Yield Recommended List published in the
Private Client Focus (including any additional issues of the same
entity which have equivalent or higher published ratings); or c) the
debt securities are convertible, without the payment of cash or other
consideration, into equity securities which are rated as "market
performers" or better by the Research Department.
(iii) private placements including products of the Special
Investment Group and other OTC, customized derivative financial
transactions;
(iv) warrants and listed options as follows: a) warrants other than
the purchase or sale of equity warrants with an original purchase
price $20 or more; b) listed options other than selling listed calls
against securities the client owns, selling listed puts against cash
or cash equivalents sufficient to pay for securities that may be put
to the client, buying listed puts against securities the client owns.
(v) Index options, swaps, OTC options, forwards, futures, stripped
securities (other than government securities), collaterized mortgage
obligations, fixed income derivative securities (e.g., I/O's, P/O's
or inverse floaters) or commodities trading;
(vi) transactions involving control or restricted securities;
(vii) foreign currency transactions other than those necessary to
settle a foreign securities transaction; and
(viii) the purchase of funds administered or advised by Goldman
Sachs Asset Management, other than certain money
<PAGE>
market funds managed by Goldman Sachs Asset Management/ILA/ITA that have a
constant $1.00 per unit net asset value.
I further understand that you may modify the foregoing discretionary
trading policies, without my consent, or notice to me. I also understand
that Goldman Sachs will rely upon recently published ratings of securities
in complying with the above-described or any other restrictions or
policies.
I further understand that the Firm has other policies and procedures
applicable to discretionary and nondiscretionary transactions generally
(e.g., to ensure compliance with insider trading prohibitions or other
provisions of the federal securities laws) and that you will not execute
transactions prohibited thereby. I further understand that you may
modify, without my consent or notice to me, such Firm policies and
procedures.
The undersigned hereby agrees that Goldman Sachs may submit orders jointly
on behalf of the Account and the accounts of other of Goldman Sachs'
customers and you need not designate any of the Account's eligible orders
via the DOT system. The undersigned also agrees that the average price of
executions resulting from such orders will be assigned to the Account.
The undersigned hereby further agrees that Goldman Sachs may execute
orders for other customer accounts or proprietary accounts along with
orders on the same side of the market for the Account, and that, in such
situation, the Account will be assigned a portion of such executions
reflective of the customer's share of the outstanding orders in accordance
with Goldman Sachs policies. The undersigned hereby further agrees that
Goldman Sachs may act as principal or as agent, and may cross orders on
behalf of the Account with orders for the accounts of other Goldman Sachs'
customers or proprietary accounts. The undersigned further understand
that Goldman Sachs may receive additional compensation as a result of the
Investment on cash balances in certain money market funds managed or
advised by Goldman Sachs that the Account may make.
This authorization: (a) is a continuing one, and shall not be affected by
the subsequent incompetence or disability of the undersigned and shall
remain in full force and effect until 24 hours after the receipt at
Goldman Sachs of written notice of the undersigned's revocation thereof or
written notice of the undersigned's death, and such revocation or notice
shall cancel all outstanding unexecuted orders which can be cancelled, but
such revocation shall not affect any liability in any way resulting from
transactions initiated prior to such revocation, and all transactions
initiated prior to Goldman Sachs' receipt of said notice of the
undersigned's death shall be binding on the undersigned's estate, (b)
shall inure to the benefit of Goldman Sachs and any successor firm or
firms; (c) shall be binding upon the undersigned's executors,
administrators and legal representatives to the extent specifically
provided herein; and (d) is in addition to (and in no way limits or
restricts) any of the provisions of, or the rights which Goldman Sachs may
have under, any other agreement or agreements between Goldman Sachs and
the undersigned relating to the Account, including, without limitation,
those provisions relating to the arbitration of disputes.
THE ACCOUNT AND TRANSACTIONS THEREFOR AND ALL DOCUMENTS PERTAINING THERETO,
INCLUDING WITHOUT LIMITATION THIS TRADING AUTHORIZATION, SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CHOICE OF LAW RULES.
- ------------------------------------------------------------------------------
SIGNATURE: /S/ SCOTT K. GINSBURG DATE 7/10/98
- ------------------------------------------------------------------------------
PLEASE PRINT NAME SCOTT K. GINSBURG
- ------------------------------------------------------------------------------
SIGNATURE: /S/ DATE
- ------------------------------------------------------------------------------
PLEASE PRINT NAME
- ------------------------------------------------------------------------------
<PAGE>
REQUEST FOR APPROVAL OF Goldman, Sach & Co. [GOLDMAN
DISCRETIONARY ACCOUNT 85 Broad Street SACHS
(ATTACH COPY OF TRADING New York, NY 10004-2456 LOGO]
AUTHORIZATION) 212-902-1000
- -----------------------------------------------------------------------------
Title of Account Account Number
Scott K. Ginsburg 012-07137-9
- -----------------------------------------------------------------------------
BACKGROUND OF ACCOUNT: (please provide relevant information, in addition to that
requested below, as appropriate)
<TABLE>
<S> <C>
1. Age 44; Marital Status D 5. Estimated total annual income:
___ --- $3MM
Number of Dependents: 2 ----------------------------------------------------
---
2. Current or former occupation of customer: 6. Estimated liquid net worth (cash, securities, etc.):
Media exec. $350MM
---------------------------------------- ----------------------------------------------------
3. Education Background: BS 7. Estimated value of assets to be managed:
---- $25MM
----------------------------------------------------
4. How long has the account been at the Firm? 8. GS Managed Assets as Percentage of Account's
NEW Total Net Worth: (less than) 10%
---------------------------------------- ----------------------------------------------------
</TABLE>
9. Describe customer's investment experience at Goldman Sachs and elsewhere,
and the types of investments he or she currently has.
Scott Ginsburg was the Founder of Evergreen Media which merged with Chancellor
Media in 1995. Scott become the CEO of Chancellor until he recently retired with
approximately $350 million. Scott has 10 years equity trading experience and a
little bond trading experience.
- -----------------------------------------------------------------------------
SALESPERSON ACKNOWLEDGMENT
- -----------------------------------------------------------------------------
(To be signed by all members of sales team who have been approved for
discretionary trading)
We acknowledge the policies, procedures and restrictions applicable to
discretionary accounts contained in the Manual entitled Compliance Policies and
Procedures for Discretionary Accounts in Private Client Services and agree to
abide thereby should this request be approved.
- -------------------------------------------------------------------------------
Salesperson /S/ Date 7/15/98
- -------------------------------------------------------------------------------
Please Print Name
Salesperson /S/ Date 7/15/98
- -------------------------------------------------------------------------------
Please Print Name
Salesperson /S/ Date 7/15/98
Please Print Name:
- -------------------------------------------------------------------------------
EQDAA 5/96 Please See Reverse Side
