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EXHIBIT 10.27
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LOAN AGREEMENT
Dated as of January 28, 1997
between
DIGITAL GENERATION SYSTEMS, INC.
as Borrower,
and
VENTURE LENDING & LEASING, INC.,
as Lender
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TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINITIONS.................................................................... 1
ARTICLE 2 - THE COMMITMENT AND LOANS....................................................... 6
2.1 The Commitment.............................................................. 6
2.2 Limitation on Loans......................................................... 6
2.3 Notes Evidencing Loans; Repayment........................................... 6
2.4 Procedures for Borrowing.................................................... 7
2.5 Interest.................................................................... 7
2.6 Interest Rate Calculation................................................... 7
2.7 Default Interest............................................................ 7
2.8 Lender's Records............................................................ 7
2.9 Security.................................................................... 7
2.10 Issuance of Warrant to Lender............................................... 8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES................................................. 8
3.1 Due Organization............................................................ 8
3.2 Authorization, Validity and Enforceability.................................. 8
3.3 Compliance with Applicable Laws............................................. 8
3.4 Copyrights, Patents, Trademarks and Licenses................................ 8
3.5 No Conflict................................................................. 9
3.6 No Litigation, Claims or Proceedings........................................ 9
3.7 Correctness of Financial Statements......................................... 9
3.8 No Subsidiaries............................................................. 9
3.9 Environmental Matters....................................................... 9
3.10 No Event of Default......................................................... 9
3.11 Full Disclosure............................................................. 9
ARTICLE 4 - CONDITIONS PRECEDENT........................................................... 10
4.1 Conditions to First Loan.................................................... 10
4.2 Conditions to All Loans..................................................... 10
ARTICLE 5 - AFFIRMATIVE COVENANTS.......................................................... 11
5.1 Notice to Lender............................................................ 11
5.2 Financial Statements........................................................ 11
5.3 Managerial Assistance from Lender........................................... 12
5.4 Existence................................................................... 13
5.5 Insurance................................................................... 13
5.6 Accounting Records.......................................................... 13
5.7 Compliance With Laws........................................................ 13
5.8 Taxes and Other Liabilities................................................. 13
5.9 Use of Proceeds............................................................. 14
ARTICLE 6 - NEGATIVE COVENANTS............................................................. 14
6.1 Indebtedness................................................................ 14
6.2 Liens....................................................................... 14
6.3 Dividends................................................................... 14
6.4 Changes/Mergers............................................................. 14
6.5 Sales of Assets............................................................. 15
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TABLE OF CONTENTS
(continued)
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ARTICLE 7 - EVENTS OF DEFAULT.............................................................. 15
7.1 Events of Default........................................................... 15
ARTICLE 8 - GENERAL PROVISIONS............................................................. 16
8.1 Notices..................................................................... 16
8.2 Binding Effect.............................................................. 16
8.3 No Waiver................................................................... 17
8.4 Rights Cumulative........................................................... 17
8.5 Unenforceable Provisions.................................................... 17
8.6 Accounting Terms............................................................ 17
8.7 Indemnification; Exculpation................................................ 17
8.8 Reimbursement............................................................... 18
8.9 Execution in Counterparts................................................... 18
8.10 Entire Agreement............................................................ 18
8.11 Governing Law and Jurisdiction.............................................. 18
8.12 Waiver of Jury Trial........................................................ 18
LIST OF EXHIBITS
Exhibit "A" Form of Note
Exhibit "B" Form of Borrowing Request
Exhibit "C" Security Agreement
Exhibit "D" Form of Warrant
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LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of January 28, 1997,
between DIGITAL GENERATION SYSTEMS, INC., a California corporation ("Borrower"),
and VENTURE LENDING & LEASING, INC., a Maryland corporation ("VLLI" or
"Lender").
WHEREAS, Lender has agreed to make available to Borrower a term
loan facility upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
The definitions appearing in this Agreement or any supplement or
addendum to this Agreement, shall be applicable to both the singular and plural
forms of the defined terms:
"AFFILIATE" means any Person which directly or indirectly controls, is
controlled by, or is under common control with, Borrower. "Control," "controlled
by" and "under common control with" means direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise); provided that
control shall be conclusively presumed when any Person or affiliated group
directly or indirectly owns five percent (5%) or more of the securities having
ordinary voting power for the election of directors of a corporation.
"AGREEMENT" means this Loan Agreement as it may be amended or
supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section.101, et seq.), as amended.
"BASIC INTEREST" means the amount of interest payable on the outstanding
balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds of a Loan
are disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in
substantially the form of Exhibit "B" hereto, requesting the funding of one or
more Loans on a particular Borrowing Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or San Francisco are authorized or
required by law to close.
"CLOSING DATE" means the date of this Agreement.
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"COLLATERAL" has the meaning ascribed thereto in the Security Agreement.
"COMMITMENT" means the obligation of Lender to make Loans to Borrower in
an aggregate, original principal amount not exceeding Six Million Dollars
($6,000,000.00).
"DEFAULT" means an event which with the giving of notice, passage of
time, or both would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.7.
"DESIGNATED RATE" means a fixed rate of interest per annum applicable to
a Loan calculated at ten percent (10%) interest rate.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, or safety matters.
"EVENT OF DEFAULT" means any event described in Article 7.
"GAAP" means generally accepted accounting principles and practices
consistent with those principles and practices promulgated or adopted by the
Financial Accounting Standards Board and the Board of the American Institute of
Certified Public Accountants, their respective predecessors and successors.
"INDEBTEDNESS" of any Person means at any date, without duplication and
without regard to whether matured or unmatured, absolute or contingent: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person in connection with any agreement to purchase,
redeem, exchange, convert or otherwise acquire for value any capital stock of
such Person or any warrants, rights or options to acquire such capital stock,
now or hereafter outstanding, except to the extent that such obligations remain
performable solely at the option of such Person; (viii) all obligations to
repurchase assets previously sold (including any obligation to repurchase any
accounts or chattel paper under any factoring, receivables purchase, or similar
arrangement); (ix) obligations of such Person under interest rate swap, cap,
collar or similar hedging arrangements; and (x) all obligations of others of any
type described in clause (i) through clause (ix) above guaranteed by such
Person.
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"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before
any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"LIEN" means any voluntary or involuntary security interest, mortgage,
pledge, claim, charge, encumbrance, title retention agreement, or third party
interest, covering all or any part of the property of Borrower or any other
Person.
"LOAN" means an extension of credit by Lender under Section 2 of this
Agreement.
"LOAN DOCUMENTS" means, individually and collectively, this Agreement,
each Note, the Security Agreement and any other security or pledge agreement(s),
and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the extensions of credit which are the subject
of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a
material adverse change in, or a material adverse effect upon, the operations,
business, properties, or condition (financial or otherwise) of Borrower; (b) a
material impairment of the ability of Borrower to perform under any Loan
Document; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of (i) its
maturity by reason of acceleration, or (ii) its stated maturity date, which is
the first day of the [37th] full month after the Borrowing Date of such Loan;
and is the date on which payment of all outstanding principal, accrued interest,
and the Terminal Payment is due.
"NOTE" means a promissory note substantially in the form of Exhibit "A"
hereto, executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document, owing by Borrower to
Lender, whether direct or indirect (including those acquired by assignment),
absolute or contingent, liquidated or unliquidated, due or to become due, now
existing or hereafter arising.
"PERMITTED LIEN" means
a) involuntary Liens which, in the aggregate, would not have a
Material Adverse Effect and which in any event would not exceed
Three-Hundred Thousand Dollars ($300,000);
b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested
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in good faith by the appropriate procedures and for which appropriate
reserves are maintained;
c) purchase money security interests on any property held or
acquired by Borrower in the ordinary course of business securing
Indebtedness incurred or assumed for the purpose of financing all or any
part of the cost of acquiring such property; provided, that such Lien
attaches solely to the property acquired with such Indebtedness and that the
principal amount of such Indebtedness does not exceed one hundred percent
(100%) of the cost of such property; and further provided, that such
property is not equipment with respect to which a Loan has been made
hereunder.
d) Liens in favor of Lender;
e) bankers' liens, rights of setoff and similar Liens incurred
on deposits made in the ordinary course of business;
f) materialmen's, mechanics', repairmen's, employees' or other
like Liens arising in the ordinary course of business and which are not
delinquent for more than 45 days or are being contested in good faith by
appropriate proceedings;
g) any judgment, attachment or similar Lien, unless the
judgment it secures has not been discharged or execution thereof effectively
stayed and bonded against pending appeal within 30 days of the entry
thereof;
h) licenses or sublicenses of Patents, Patent Licenses,
Trademarks or Trademark Licenses permitted under the Trademark Collateral
Assignment or the Patent Collateral Assignment (all as defined in the
Security Agreement); and
i) Liens which have been approved by Lender prior to the
Closing Date.
"PERSON" means any individual or entity.
"RELATED PERSON" means any Affiliate of Borrower, or any officer,
employee, director or equity security holder of Borrower or any Affiliate.
"REPORTING COMPANY" means an issuer subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.
"SEC" means the Securities and Exchange Commission.
"SECURITY AGREEMENT" means the Security Agreement substantially in the
form of Exhibit "C" hereto, executed by Borrower.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount payable
on the Maturity Date of such Loan in an amount equal to [fifteen percent (15%)]
of the original principal amount of such Loan.
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"TERMINATION DATE" means the earlier of: (a) the date Lender may
terminate making loans or extending credit pursuant to the rights of Lender
under Article 7, or (b) December 31, 1997.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
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ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of this
Agreement, Lender agrees to make term loans to Borrower from time to time from
the Closing Date and to, but not including, the Termination Date in an aggregate
principal amount not exceeding the Commitment. The Commitment is not a revolving
credit commitment, and Borrower shall not have the right to repay and reborrow
hereunder.
2.2 LIMITATION ON LOANS. Each Loan shall be in an amount not to exceed
one hundred percent (100%) of the amount paid or payable by Borrower to a
non-affiliated manufacturer, vendor or dealer for an item of equipment as shown
on an invoice therefor (excluding any commissions and any portion of the payment
which relate to the servicing of the equipment and sales taxes payable by
Borrower upon acquisition, and delivery charges). Lender shall not be obligated
to make any Loan under its Commitment if at the time of or after giving effect
to the proposed Loan Lender would no longer qualify as: (A) a "venture capital
operating company" under U.S. Department of Labor Regulations Section
2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended; and (B)
a "business development company" under the provisions of federal Investment
Company Act of 1940, as amended; and (C) a "regulated investment company" under
the provisions of the Internal Revenue Code of 1986, as amended. Each Loan
requested by Borrower to be made on a single Business Day shall be for a
principal amount of Fifty Thousand Dollars ($50,000) or a multiple thereof,
except to the extent the remaining Commitment is a lesser amount.
2.3 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by a
separate Note payable to the order of Lender substantially in the form of
Exhibit "A" to this Agreement, in the total principal amount of the Loan. Each
Note shall be payable as follows: Principal and Basic Interest shall be paid in
thirty-six (36) equal and successive monthly payments, in advance, beginning on
the Borrowing Date and continuing on the first Business Day of each month
thereafter; provided, that the first and last such amortization installment
payments shall be paid in advance on the Borrowing Date. If the Borrowing Date
is not the first day of a month, then the 36-month amortization period shall
commence on the first day of the next month following the Borrowing Date, and
interest only shall accrue and be payable for the period from the Borrowing Date
to the first day of the next month. Borrower shall pay to Lender, in advance, on
the Borrowing Date a payment of Basic Interest on the amount of any Loan that is
not made on the first day of the month for interest that will accrue on such
Loan from the Borrowing Date through the last day of the same month. The payment
of amortization installments of principal of and interest on a Loan in advance
results in a higher effective rate of interest than the stated Designated Rate
applicable to such Loan. The full amount of the Terminal Payment with respect to
each Loan shall be due and payable on the Maturity Date of such Loan.
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2.4 PROCEDURES FOR BORROWING.
a) Borrower shall give Lender, at least five (5) Business Days prior
to a proposed Borrowing Date, written notice of any request for borrowing
hereunder (a "Borrowing Request"). Each Borrowing Request shall be in
substantially the form of Exhibit "B" hereto, shall be executed by the chief
financial officer of Borrower, and shall state how much is requested, and
shall be accompanied by such additional information and documentation as
Lender may deem reasonably necessary to determine whether the proposed
borrowing will comply with the limitations in Section 2.2. To the Borrower's
best knowledge after due inquiry of its senior officers, the Borrowing
Request shall also certify that all equipment to be financed thereby is, or
will upon acquisition be, owned by Borrower free and clear of all Liens
except in favor of Lender.
b) No later than 1:00 p.m. Pacific Standard Time or Pacific Daylight
Time, as the case may be, on the Borrowing Date, if Borrower has satisfied
the conditions precedent in Article 4, Lender shall make the Loan available
to Borrower in immediately available funds.
2.5 INTEREST. Basic Interest on the outstanding principal balance of the
each Loan shall accrue daily at the Designated Rate from the Borrowing Date
until the Maturity Date.
2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and
fees under this Agreement and any Loan Document, shall be calculated for actual
days elapsed on the basis of a 360-day year, which results in higher interest,
charge or fee payments than if a 365-day year were used. In no event shall
Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest or
the Terminal Payment with respect to any Loan shall bear interest from their
respective maturities, whether scheduled or accelerated, at the Designated Rate
for such Loan plus five percent (5.00%) per annum, until paid in full, whether
before or after judgment (the "Default Rate"). Borrower shall pay such interest
on demand.
2.8 PREPAYMENT OF LOANS. No Loan may be voluntarily prepaid except as
provided in this Section 2.8. Borrower may prepay any Loan, in whole or in part
at any time after the second anniversary of the Borrowing Date for such Loan.
Notwithstanding the provisions of Article 6, Borrower may (x) sell, transfer,
lease or otherwise dispose of all of substantially all of Borrower's assets or
(y) enter into a merge in which Borrower will not be the surviving corporation
if, immediately prior to the consummation of such transaction Borrower prepays
all Loans then outstanding. Any prepayment, including any prepayment pursuant to
this Section 2.8, whether voluntary or involuntary as a result of acceleration
or otherwise, must be accompanied by payment of: (i) a premium equal to one
percent (1.00%) of the amount of principal so prepaid if such prepayment is
made; (ii) accrued Basic Interest to the date of such prepayment; and (iii) the
Terminal Payment on the Loan so prepaid (or a ratable portion of such Terminal
Payment, if less than all of the Loan is prepaid). Unless otherwise agreed
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by Lender, any partial prepayment of a Loan (whether a Term Loan or an Equipment
Loan) shall be applied in inverse order of maturity to the most remote principal
installment then unpaid on such Loan.
2.9 LENDER'S RECORDS. Principal, Basic Interest, Terminal Payments and
all other sums owed under any Loan Document shall be evidenced by entries in
records maintained by Lender for such purpose. Each payment on and any other
credits with respect to principal, Basic Interest, Terminal Payments and all
other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error or Borrower's notice to the contrary,
Lender's records shall constitute prima facie evidence thereof.
2.10 SECURITY. As security for all Obligations to Lender, Borrower shall
grant concurrently to Lender, or ensure that Lender is concurrently granted,
perfected security interests of first priority in all of the Collateral pursuant
to the Security Agreement, subject only to Permitted Liens.
2.11 ISSUANCE OF WARRANT TO LENDER. As additional consideration for the
making of the commitment, and as a condition to, the initial Loan, Lender shall
be entitled to receive a warrant to purchase 112,500 shares of common stock of
Borrower ("Warrant Shares") with a per share exercise price of $8.00. The
warrant issued under this Agreement shall be in substantially the form attached
hereto as Exhibit "D"; shall be transferable by Lender, subject to compliance
with applicable securities laws; shall expire not earlier than December 31,
2002; and shall include piggy-back registration rights and "net issuance"
provisions reasonably satisfactory to Lender and its counsel.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that as of the Closing Date and
each Borrowing Date:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and
validly existing in good standing under the laws of California, and is duly
qualified to conduct business and is in good standing in each other jurisdiction
in which its business is conducted or its properties are located, except where
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery
and performance of all Loan Documents executed by Borrower are within Borrower's
powers, have been duly authorized, and are not in conflict with Borrower's
articles of incorporation or by-laws, as amended from time to time; and all such
Loan Documents constitute valid and binding obligations of Borrower, enforceable
in accordance with their terms (except as may be limited by bankruptcy,
insolvency and similar laws affecting the enforcement of creditors' rights in
general, and subject to general principles of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully
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conduct the business in which it is engaged, and to any sales, leases or the
furnishing of services by Borrower, including without limitation those requiring
consumer or other disclosures, the noncompliance with which would have a
Material Adverse Effect.
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.
a) Borrower owns or is licensed or otherwise has the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other similar rights that are
reasonably necessary for the operation of its business, without material
conflict with the rights of any other Person.
b) To Borrower's knowledge, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by Borrower materially
infringes upon any rights held by any other Person.
c) No claim or litigation regarding any of the foregoing is
pending or, to Borrower's knowledge, threatened in writing, and no patent,
invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed which, in either case,
would reasonably be expected to have a Material Adverse Effect.
3.5 NO CONFLICT. The execution, delivery, and performance by Borrower of
all Loan Documents are not in conflict with any law, rule, regulation, order or
directive, or any indenture, agreement, or undertaking to which Borrower is a
party or by which Borrower may be bound or affected, except for such conflicts
as in the aggregate would not have a Material Adverse Effect.
3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened in writing against or affecting Borrower or its property.
3.7 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of September 30, 1996; and, since that date there has
been no Material Adverse Change.
3.8 NO SUBSIDIARIES. Borrower is not a majority owner of any other
business entity, except that Borrower owns all of the outstanding Capital Stock
of PDR Productions, Inc., a New York corporation (the "Subsidiary").
3.9 ENVIRONMENTAL MATTERS. Borrower is in compliance with applicable
Environmental Laws, except to the extent a failure to be in such compliance
would not reasonably be expected to have a Material Adverse Effect on Borrower's
operations, properties or financial condition.
3.10 NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
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3.11 FULL DISCLOSURE. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Section
4.2, subject to the fulfillment of the following conditions and to the receipt
by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
a) RESOLUTIONS. A certified copy of the resolutions of the
Board of Directors of Borrower authorizing the execution, delivery and
performance by Borrower of the Loan Documents.
b) INCUMBENCY AND SIGNATURES. A certificate of the secretary
of Borrower certifying the names of the officer or officers of Borrower
authorized to sign the Loan Documents, together with a sample of the true
signature of each such officer.
c) OPINION OF COUNSEL. The opinion of Wilson, Sonsini,
Xxxxxxxx & Xxxxxx, counsel for Borrower, together with any opinions,
certificates and other matters on which such opinion relies.
d) ARTICLES AND BY-LAWS. Certified copies of the Articles of
Incorporation and By-Laws of Borrower, as amended through the Closing Date.
e) THE AGREEMENT. A counterpart of this Agreement with all
schedules completed and attached thereto, and disclosing such information as
is acceptable to Lender.
f) SECURITY AGREEMENT; FINANCING STATEMENTS. A Security
Agreement executed by Borrower, substantially in the form of Exhibit "C",
together with filing copies (or other evidenced of filing satisfactory to
Lender and its counsel) of such Uniform Commercial Code financing
statements, collateral assignments and termination statements, with respect
to the Collateral (as defined in such Security Agreement) as Lender shall
request.
g) LIEN SEARCHES. Uniform Commercial Code lien, judgment,
bankruptcy and tax lien searches of Borrower from the California Secretary
of State, and such other jurisdictions as Lender may reasonably request, all
as of a date reasonably satisfactory to Lender and its counsel.
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h) GOOD STANDING CERTIFICATE. A Certificate of Good Standing
as of a date acceptable to Lender with respect to Borrower from the
California Secretary of State.
i) WARRANT. A warrant issued by Borrower to Lender exercisable
for the Warrant Shares, as described in Section 2.11 hereof.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its
initial Loan and each subsequent Loan is subject to the following further
conditions precedent that:
a) NO DEFAULT. No Default or Event of Default has occurred and
is continuing or will result from the making of any such Loan, and the
representations and warranties of Borrower contained in Article 3 of this
Agreement are true and correct as of the Borrowing Date of such Loan.
b) NO ADVERSE MATERIAL CHANGE. No Material Adverse Change
shall have occurred since the date of the most recent financial statements
submitted to Lender.
c) NOTE. Borrower shall have delivered an executed Note
evidencing such Loan, in form and substance satisfactory to Lender.
d) BORROWING REQUEST. Borrower shall have delivered to Lender
a Borrowing Request for such Loan.
e) VCOC LIMITATION. The making of the Loan will not result in
a violation of the condition applicable to Lender described in Section 2.2.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all
obligations to Lender, Borrower will:
5.1 NOTICE TO LENDER. Upon receipt of notice thereof by an officer of
Borrower, promptly give written notice to Lender of:
a) Any litigation or administrative or regulatory proceeding
to which Borrower is a party where the granting of the relief requested
would have a Material Adverse Effect.
b) Any substantial dispute which may exist between Borrower or
any governmental or regulatory authority.
c) The occurrence of any Default or any Event of Default.
d) Any change in the location of Borrower's principal
executive office of business at least thirty (30) days in advance of such
change, or of the establishment of any new, or the discontinuance of any
existing, place of business.
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e) Any other matter which has resulted or would reasonably
result in a Material Adverse Change.
5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to be
delivered to Lender, in form and detail satisfactory to Lender the following
financial information, which Borrower warrants shall present fairly Borrower's
financial condition in all material respects:
a) QUARTERLY FINANCIAL STATEMENTS. As soon as available but no
later than forty-five (45) days after the end of each month, Borrower's
balance sheet as of the end of such period, and Borrower's income statement
for such period and for that portion of Borrower's financial reporting year
ending with such period, prepared and attested by a responsible financial
officer of Borrower as being complete and correct and fairly presenting
Borrower's financial condition and the results of Borrower's operations;
provided, however, that, so long as Borrower is a Reporting Company,
Borrower may satisfy its obligations under this Section 5.2(a) by delivering
to Lender promptly after filing with the SEC, copies of Borrower's Quarterly
Reports on Form 10-Q (without exhibits) and any amendments thereto.
b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no
later than one hundred twenty (120) days after and as of the end of each
financial reporting year, a complete copy of Borrower's audit report, which
shall include balance sheet, income statement, statement of changes in
equity and statement of cash flows for such year, prepared and certified by
an independent certified public accountant selected by Borrower and
satisfactory to Lender (the "Accountant"). The Accountant's certification
shall not be qualified or limited due to a restricted or limited examination
by the Accountant of any material portion of Borrower's records or
otherwise. Notwithstanding the foregoing, so long as Borrower is a Reporting
Company, Borrower may satisfy its obligations under this Section 5.2(b) by
delivering to Lender promptly after filing with the SEC copies of Borrower's
Annual Reports on Form 10-K (without exhibits) and any amendments thereto.
c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of
each set of financial statements referred to in paragraphs (a) and (b)
above, a certificate of the chief financial officer of Borrower stating
whether any Default or Event of Default exists on the date of such
certificate, and if so, setting forth the details thereof and the action
which Borrower is taking or proposes to take with respect thereto.
d) OTHER INFORMATION. Such other statements, lists of property
and accounts, budgets, forecasts, reports, or other information as Lender
may from time to time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Solely to permit Lender, as a
"venture capital operating company" to participate in, and influence the conduct
of management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. Section 2510.3-101(d), Borrower will:
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a) Permit Lender to make available to Borrower, at no cost to
Borrower, "significant managerial assistance", as defined in Section
2(a)(47) of the Investment Company Act of 1940, as amended, either in the
form of: (i) consulting arrangements with Lender or any of its officers,
directors, employees or affiliates, (ii) Borrower's allowing Lender to
provide recommendations of prospective candidates for election to Borrower's
Board of Directors, or (iii) Lender, at Borrower's request, seeking the
services of third-party consultants to aid Borrower with respect to its
management and operations;
b) Permit Lender to make available consulting and advisory
services to officers of Borrower regarding Borrower's equipment acquisition
and financing plans, and such other matters affecting the business,
financial condition and prospects of Borrower as Lender shall reasonably
deem relevant; and
c) If Lender reasonably believes that financial or other
developments affecting Borrower have impaired or are likely to impair
Borrower's ability to perform its obligations under this Agreement, permit
Lender reasonable access to Borrower's management and/or Board of Directors
and opportunity to present Lender's views with respect to such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form
of business, and all rights and privileges necessary or desirable in the normal
course of its business; and keep all Borrower's property in good working order
and condition, ordinary wear and tear excepted.
5.5 INSURANCE. Obtain and keep in force insurance in such amounts and
types as is usual in the type of business conducted by Borrower, with insurance
carriers having a policyholder rating of not less than "A" and financial
category rating of Class VII in "Best's Insurance Guide," unless otherwise
approved by Lender. Such insurance policies must be in form and substance
satisfactory to Lender, and shall list Lender as an additional insured or loss
payee, as applicable, on endorsement(s) in form reasonably acceptable to Lender.
Borrower shall furnish to Lender such endorsements, and upon Lender's request,
copies of any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and records,
and prepare all financial statements delivered to Lender pursuant to Section 5.2
in accordance with GAAP, and in compliance with the regulations of any
governmental or regulatory authority having jurisdiction over Borrower or
Borrower's business; and permit employees or agents of Lender at such reasonable
times as Lender may request, at Borrower's expense, to inspect Borrower's
properties, and to examine, and make copies and memoranda of Borrower's books,
accounts and records.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party, except where the failure to so comply would not have a Material Adverse
Effect.
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5.8 TAXES AND OTHER LIABILITIES. Except as may be contested in good
faith by the appropriate procedures and for which Borrower shall maintain
appropriate reserves under GAAP, (i) pay all Borrower's material obligations
when due (ii) pay all material taxes and other governmental or regulatory
assessments before delinquency or before any penalty attaches thereto, Pay all
Borrower's material obligations when due; (iii) timely file all required tax
returns, except where the failure to file the same, singly or in the aggregate,
would not result in a Material Adverse Change.
5.9 USE OF PROCEEDS. Use the proceeds of Loans only as set forth in
Article 2 of this Agreement; and not directly or indirectly to purchase or carry
any margin stock, as defined from time to time by the Board of Governors of the
Federal Reserve System in Federal Regulation U.
5.10 LOCATIONS OF COLLATERAL. Not later than June 15 and December 15 of
each year during the term of this Agreement, Borrower shall deliver to Lender a
list of the location of each item of Equipment (as defined in the Security
Agreement) as of June 1 and December 1, respectively, of such year.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all
obligations to Lender, Borrower will not without Lenders approval (i) sell,
transfer, lease or otherwise dispose of all substantially all of Borrower's
assets, or (ii) enter into any merger unless Borrower is the surviving
corporation thereof, or (iii) liquidate or dissolve.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Upon the occurrence and during the continuation
of any Default, the obligation of Lender to make any additional Loan shall be
suspended. The occurrence of any of the following shall terminate any obligation
of Lender to make any additional Loan; and shall, at the option of Lender (1)
make all sums of Basic Interest and principal, all Terminal Payments, and any
other amounts owing under any Loan Documents immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor or any other notices or demands, and (2) give Lender the
right to exercise any other right or remedy provided by contract or applicable
law:
a) Borrower shall fail to pay any principal, interest or
Terminal Payment under this Agreement, or fail to pay any fees or other
charges when due under any Loan Document, and such failure continues for
five (5) Business Days or more after Borrower's receipt of notice from
Lender that the same has become due; or an Event of Default as defined in
any other Loan Document shall have occurred.
b) Any representation or warranty made, or financial
statement, certificate or other document provided, by Borrower under any
Loan Document shall be determined by a court of competent jurisdiction to
have been false or misleading in any material respect when made or deemed
made herein.
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c) Borrower shall fail to pay its debts generally as they
become due or shall commence any Insolvency Proceeding with respect to
itself; an involuntary Insolvency Proceeding shall be filed against
Borrower, or a custodian, receiver, trustee, assignee for the benefit of
creditors, or other similar official, shall be appointed to take possession,
custody or control of the properties of Borrower, and such involuntary
Insolvency Proceeding, petition or appointment is acquiesced to by Borrower
or is not dismissed within ninety (90) days; or the dissolution or
termination of the business of Borrower.
d) Borrower shall be in default beyond any applicable period
of grace or cure under any other agreement involving the borrowing of money,
the purchase of property, the advance of credit or any other monetary
liability of any kind to Lender or to any Person which results in the
acceleration of payment of such obligation in an amount in excess of Five
Hundred Thousand Dollars ($500,000).
e) Any governmental or regulatory authority shall take any
judicial or administrative action, or any defined benefit pension plan
maintained by Borrower shall have any unfunded liabilities, any of which, in
the reasonable judgment of Lender, would have a Material Adverse Effect.
f) Any sale, transfer or other disposition of all or a
substantial or material part of the assets of Borrower, including without
limitation to any trust or similar entity, shall occur.
g) Any judgment(s) singly or in the aggregate in excess of
Five Hundred Thousand Dollars ($500,000) shall be entered against Borrower
which remain unsatisfied, unvacated or unstayed pending appeal for thirty
(30) or more days after entry thereof.
h) Borrower shall fail to perform or observe any covenant
contained in Article 6 of this Agreement.
i) Borrower shall fail to perform or observe any covenant
contained in this Agreement or any other Loan Document (other than a
covenant which is dealt with specifically elsewhere in this Article 7) and
the breach of such covenant is not cured within 30 days after the sooner to
occur of Borrower's receipt of notice of such breach from Lender or the date
on which such breach first becomes known to any officer of Borrower;
provided, however that if such breach is not capable of being cured within
such 30-day period and Borrower timely notifies Lender of such fact and
Borrower diligently pursues such cure, then the cure period shall be
extended to the date requested in Borrower's notice but in no event more
than 90 days from the initial breach; provided, further, that such
additional 60-day opportunity to cure shall not apply in the case of any
failure to perform or observe any covenant which has been the subject of a
prior failure within the preceding 180 days or which is a willful and
knowing breach by Borrower.
ARTICLE 8 - GENERAL PROVISIONS
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8.1 NOTICES. Any notice given by any party under any Loan Document shall
be in writing and personally delivered, sent by overnight courier, or United
States mail, postage prepaid, or sent by facsimile, to be promptly confirmed in
writing, or other authenticated message, charges prepaid, to the other party's
or parties' addresses shown on the signature pages hereto. Each party may change
the address or facsimile number to which notices, requests and other
communications are to be sent by giving written notice of such change to each
other party. Notice given by hand delivery shall be deemed received on the date
delivered; if sent by overnight courier, on the next business day after delivery
to the courier service; if by first class mail, on the third business day after
deposit in the U.S. Mail; and if by telecopy, on the date of transmission.
8.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure
to the benefit of Borrower and Lender and their respective successors and
assigns; provided, however, that Borrower may not assign or transfer Borrower's
rights or obligations under any Loan Document without Lender's prior written
consent. Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
obligations under the Loan Documents. In connection with any of the foregoing,
Lender may disclose all documents and information which Lender now or hereafter
may have relating to the Loans, Borrower, or its business; provided that any
person who receives such information shall have agreed in writing in advance to
maintain the confidentiality of such information on terms reasonably acceptable
to Borrower.
8.3 NO WAIVER. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan Document.
No failure or delay on the part of Lender in exercising any power, right, or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right, or privilege shall preclude
any further exercise thereof or the exercise of any other power, right or
privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
8.4 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
8.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document
executed by Borrower which is prohibited or unenforceable in any jurisdiction,
shall be so only as to such jurisdiction and only to the extent of such
prohibition or unenforceability, but all the remaining provisions of any such
Loan Document shall remain valid and enforceable.
8.6 ACCOUNTING TERMS. Except as otherwise provided in this Agreement,
accounting terms and financial covenants shall be determined in accordance with
GAAP.
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8.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend
and indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, reasonable attorneys' fees and costs) and other
amounts incurred by Lender and each such Agent, arising from (i) the matters
contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; PROVIDED, HOWEVER, that
this indemnification shall not apply to any of the foregoing incurred
principally as the result of Lender's or any Agent's gross negligence or willful
misconduct. This indemnification shall survive the payment and satisfaction of
all of Borrower's Obligations to Lender.
8.8 REIMBURSEMENT. Borrower shall reimburse Lender for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation and negotiation of the Loan Documents, including without limitation
during any workout, attempted workout, and/or in connection with the rendering
of legal advice as to Lender's rights, remedies and obligations under the Loan
Documents, (b) collecting any sum which becomes due Lender under any Loan
Document, (c) any proceeding for declaratory relief, any counterclaim to any
proceeding, or any appeal, or (d) the protection, preservation or enforcement of
any rights of Lender. For the purposes of this section, attorneys' fees shall
include, without limitation, fees incurred in connection with the following: (1)
contempt proceedings; (2) discovery; (3) any motion, proceeding or other
activity of any kind in connection with an Insolvency Proceeding; (4)
garnishment, levy, and debtor and third party examinations; and (5) postjudgment
motions and proceedings of any kind, including without limitation any activity
taken to collect or enforce any judgment. All of the foregoing costs and
expenses shall be payable upon demand by Lender, and if not paid within
forty-five (45) days of presentation of invoices shall bear interest at the
highest applicable Default Rate.
8.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts which, when taken together, shall constitute but one
agreement.
8.10 ENTIRE AGREEMENT. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
8.11 GOVERNING LAW AND JURISDICTION.
a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA.
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b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN THE COURTS OF THE
STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
BORROWER AND LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND LENDER
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA
LAW.
8.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement as of the date set forth in the preamble.
ADDRESSES FOR NOTICES: DIGITAL GENERATION SYSTEMS, INC.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000 By: /s/ XXXXXX X. XXXXXXXX
Attn: Xxxxxx X. Xxxxxxxx --------------------------------
Fax No.: 000-000-0000 Name: Xxxxxx X. Xxxxxxxx
Its: Chief Financial Officer
Venture Lending & Leasing, Inc. VENTURE LENDING & LEASING, INC.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxxxx By: /s/ XXXXXXXX X. XXXXXXXXX
President --------------------------------
Fax No. 000-000-0000 Name: Xxxxxxxx X. Xxxxxxxxx
Its: President
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EXHIBIT "A"
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$____________________ ____________________, 000___
Xxx Xxxx, Xxxxxxxxxx
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING, INC., a Maryland corporation ("Lender") at its office at 0000
Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000, or at such other
place as Lender may designate in writing, in lawful money of the United States
of America, the principal sum of _________ Dollars ($__________), with Basic
Interest thereon from the date hereof until maturity, whether scheduled or
accelerated, at a fixed rate per annum of ten percent (10%), and a Terminal
Payment in the sum of _____ [15% of face amount] Dollars ($__________) payable
on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits and subject to all of the provisions of, a Loan Agreement dated January
28, 1997, between Borrower and Lender. Each capitalized term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement contains provisions for the acceleration of the maturity of this Note
upon the happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in
advance, on the outstanding principal balance of this Note at the Designated
Rate for the period from the Borrowing Date through [THE LAST DAY OF THE SAME
MONTH]; and (ii) a first (1st) and last (36th) amortization installment of
principal and Basic Interest in the amount of _________________, in advance for
the months of [ first and last full month after Borrowing Date ].
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in thirty-four (34)
equal consecutive installments of _________ Dollars ($__________) each, with a
thirty-sixth (36th) installment equal to the entire unpaid principal balance and
accrued Basic Interest thereon on _______________, 200_. The Terminal Payment
amount shall be payable on [ONE MONTH LATER], 200_.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
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Interest, charges and fees shall be calculated for actual days elapsed
on the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
This Note shall be governed by, and construed in accordance with, the
internal laws of the State of California.
DIGITAL GENERATION SYSTEMS, INC.
By:________________________________
Name: _____________________________
Its: ______________________________
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Exhibit "B"
BORROWER REQUEST
____________, 1997
Venture Lending & Leasing, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
RE: DIGITAL GENERATION SYSTEMS, INC.
Gentlemen:
Reference is made to the Loan Agreement dated as of January 28, 1997 (as
it has been and may be amended from time to time, the "Loan Agreement", the
capitalized terms used herein as defined therein), between Venture Lending &
Leasing, Inc. and Digital Generation Systems, Inc. (the "Company").
The undersigned is the Chief Financial Officer of the Company, and
hereby requests a Loan under the Loan Agreement, and in that connection
certifies as follows:
1. The amount of the proposed Loan is $____________. The Business Day of
the proposed Loan is _____ ___ 1997.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in Article 3 of the Loan
Agreement are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
-------------------------
Chief Financial Officer
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Exhibit "C"
SECURITY AGREEMENT
(EQUIPMENT)
This Agreement is made as of January 28, 1997, by DIGITAL GENERATION
SYSTEMS, INC. a California corporation ("Debtor") in favor of VENTURE LENDING &
LEASING, INC., a Maryland corporation ("Secured Party").
ARTICLE 1 - DEFINITIONS
The following definitions shall be applicable to both the singular and
plural forms of the defined terms:
"AGREEMENT" means this Security Agreement, as it may be amended from
time to time.
"COLLATERAL" means all Debtor's Equipment and Fixtures now owned or
hereafter acquired, wherever located, and whether held by Debtor or any third
party, and all proceeds and products thereof, including all insurance and
condemnation proceeds ("Proceeds"), and all monies now or at any time hereafter
in the possession or under the control of Secured Party or a bailee or affiliate
of Secured Party, including any cash collateral in any cash collateral or other
account, and all Records relating or useful to, or used in connection with any
of the foregoing.
"EQUIPMENT" means all of Debtor's specific equipment identified and
described on Schedule 1 attached to this Agreement and incorporated herein by
reference (as such Schedule may be amended or supplemented from time to time),
all replacements, parts, accessions and additions thereto, and all proceeds
thereof arising from the sale, lease, rental or other use or disposition
thereof, including all rights to payment with respect to insurance or
condemnation, returned premiums, or any cause of action relating to any of the
foregoing.
"EVENT OF DEFAULT" means an event described in Article 6.
"FIXTURES" means all items of Equipment that are so related to the real
property upon which they are located that an interest in them arises under real
property law, and all proceeds thereof arising from the sale, lease, rental or
other use or disposition thereof.
"INDEBTEDNESS" means all debts, obligations and liabilities of Debtor to
Secured Party currently existing or now or hereafter made, incurred or created,
whether pursuant to the Loan Documents, whether voluntary or involuntary and
however arising or evidenced, whether direct or acquired by Secured Party by
assignment or succession, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such debt may be or
become barred by any statute of limitations or otherwise unenforceable and all
renewals, extensions and modifications thereof, and all attorneys' fees and
costs incurred by Secured Party in connection with the collection and
enforcement thereof.
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"LIEN" means with respect to an item of property, any voluntary or
involuntary security interest, mortgage, pledge, claim, charge, encumbrance,
title retention agreement, or third party interest covering all or any part of
such property.
"LOAN AGREEMENT" means that certain Loan Agreement between Debtor and
Secured Party of even date herewith, as amended from time to time.
"PERSON" means any individual or entity.
"PERMITTED LIEN" means
a) involuntary Liens which, in the aggregate, would not have a
Material Adverse Effect and which in any event would not exceed Three-Hundred
Thousand Dollars ($300,000);
b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested in good faith by
the appropriate procedures and for which appropriate reserves are maintained;
c) purchase money security interests on any property held or acquired
by Borrower in the ordinary course of business securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
such property; provided, that such Lien attaches solely to the property acquired
with such Indebtedness and that the principal amount of such Indebtedness does
not exceed one hundred percent (100%) of the cost of such property; and further
provided, that such property is not equipment with respect to which a Loan has
been made hereunder.
d) Liens in favor of Lender;
e) bankers' liens, rights of setoff and similar Liens incurred on
deposits made in the ordinary course of business;
f) materialmen's, mechanics', repairmen's, employees' or other like
Liens arising in the ordinary course of business and which are not delinquent
for more than 45 days or are being contested in good faith by appropriate
proceedings;
g) any judgment, attachment or similar Lien, unless the judgment it
secures has not been discharged or execution thereof effectively stayed and
bonded against pending appeal within 30 days of the entry thereof; and
h) Liens which have been approved by Lender prior to the Closing Date
and disclosed on Schedule 6.2 to this Agreement.
"RECORDS" means all Debtor's computer programs, software, hardware,
source codes and data processing information, all written documents, books,
invoices, ledger sheets, financial information and statements, and all other
writings concerning Debtor's business.
"UNIFORM COMMERCIAL CODE" means the California Uniform Commercial Code,
as amended from time to time.
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Terms not specifically defined in this Agreement have the meanings
prescribed in the Loan Agreement, and if not defined therein then the meanings
prescribed in the Uniform Commercial Code.
ARTICLE 2 - GRANT OF SECURITY INTEREST
To secure the timely payment of the Indebtedness and performance of all
obligations of Debtor to Secured Party arising under the Loan Documents (as
defined in the Loan Agreement), Debtor grants to Secured Party a security
interest in the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants that, at all times during the term of
this Agreement:
3.1 GOVERNMENTAL ACTIONS. Debtor has obtained all consents and actions
of, and has performed all filings with, any governmental or regulatory authority
required to authorize the execution, delivery or performance of this Agreement,
except for such consents, acting and filings, the absence of which would not
result in a Material Adverse Change. Debtor has, at the time Lender makes a Loan
with respect to an item of equipment in accordance with Section 2.2 of the Loan
Agreement, and at all times thereafter while such Loan is outstanding, obtained
all consents and actions of, and has performed all filings with, any
governmental or regulatory authority required on the part of the debtor to grant
and perfect Secured Party's security interest in any Collateral acquired with
the proceeds of such Loan.
3.2 TITLE. Debtor is and will be the unconditional legal and beneficial
owner of the Collateral. The Collateral is subject to no Liens, rights or
defenses of others, except Permitted Liens.
3.3 CHIEF EXECUTIVE OFFICE. Debtor's chief executive office is located
at:
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
3.4 RECORDS LOCATION. Other than as set forth in Section 3.3, Records
are maintained at:
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
3.5 EQUIPMENT OR FIXTURES LOCATION. Other than as set forth in Section
3.3, Equipment or Fixtures are located at:
to be designated by Company
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3.6 OTHER PLACES OF BUSINESS. In addition to the locations set forth in
Sections 3.3 through 3.5, Debtor maintains the following place(s) of business:
to be designated by Company
3.7 BUSINESS NAMES. Debtor has conducted business in the following names
other than as stated in the preamble to this Agreement:
ARTICLE 4 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until payment of all the
Indebtedness and performance of all obligations to Secured Party that are
secured by this Agreement, Debtor will, unless Secured Party otherwise consents
in writing:
4.1 DELIVERY OF CERTAIN ITEMS. Deliver to Secured Party promptly (a)
after an Event of Default, all Proceeds; (b) such specific acknowledgments,
assignments or other agreements as Secured Party may reasonably request relating
to the Collateral; and (c) copies of such Records and other reports in such form
and detail and at such times as Secured Party may reasonably require relating to
the Collateral.
4.2 MAINTENANCE OF COLLATERAL; INSPECTION. Do all things necessary to
maintain, preserve, protect and keep all Collateral in good working order and
saleable condition, dealing with the Collateral in all ways as are considered
good practice by owners of like property, and use the Collateral lawfully and
only as permitted by Debtor's insurance policies. Debtor hereby authorizes
Secured Party's officers, employees, representatives and agents, upon reasonable
notice, at reasonable times and with reasonable frequency, to inspect the
Collateral and to discuss the Collateral and the Records relating thereto with
Debtor's officers.
4.3 MAINTENANCE OF RECORDS; INSPECTION. Maintain, or cause to be
maintained, complete and accurate Records relating to the Collateral. Secured
Party, its officers, employees, agents and representatives, upon reasonable
notice, shall have the right, from time to time, to examine the Records relating
to the Collateral and to make copies or extracts therefrom.
4.4 DEBTOR'S DUTY TO GIVE NOTICE. Give prompt notice to Secured Party
of: (a) any decrease in the value of any Collateral and the amount of such
decrease (other than depreciation calculated in the ordinary course of business
under applicable tax laws and regulations and in accordance with generally
accepted accounting principles); (b) any threatened or asserted dispute or claim
with respect to the Collateral; (c) any litigation or administrative or
regulatory proceeding which is reasonably likely to have a Material Adverse
Effect on Debtor or its business; (d) any change in ownership of any property on
which any Collateral is located; (e) the relocation of or intent to relocate any
Collateral to a location not listed in Sections 3.3 through 3.6 hereof; and (f)
the occurrence of any Event of Default or of any
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other development, financial or otherwise, which is reasonably likely to
materially adversely affect the Collateral or Debtor's ability to pay the
Indebtedness or perform its obligations to Secured Party.
4.5 FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to
Secured Party, and file or record at Debtor's expense all financing statements,
notices and other documents from time to time requested by Secured Party to
maintain a first perfected security interest in the Collateral in favor of
Secured Party, all in form and substance satisfactory to Secured Party, perform
such other acts and execute and deliver to Secured Party such additional
conveyances, assignments, agreements and instruments, as Secured Party may at
any time reasonably request in connection with the administration and
enforcement of this Agreement or Secured Party's rights, powers and remedies
hereunder; provided, however, that Debtor liability for such expenses shall be
limited to no more than $7,000 per calendar year and shall be payable against
Secured Party's presentation of receipts for such expense.
4.6 DECALS, MARKINGS. At the request of Secured Party, firmly affix a
decal, stencil or other marking to designated items of Collateral, indicating
thereon the security interest of Secured Party.
4.7 AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. At the request of
Secured Party, use Debtor's commercially reasonable efforts to obtain and
maintain such acknowledgments, consents, waivers and agreements from the owner,
lienholder, mortgagee and landlord with respect to any real property on which
Collateral is located as Secured Party may require, all in form and substance
reasonably satisfactory to Secured Party.
ARTICLE 5 - NEGATIVE COVENANTS
During the term of this Agreement and until payment of all the
Indebtedness and performance of all obligations to Secured Party, Debtor will
not, without Secured Party's prior written consent:
5.1 LIENS. Create, incur, assume or permit to exist any Lien on any
Collateral, except Permitted Liens.
5.2 DOCUMENTS OF TITLE. Sign or authorize the signing of any financing
statement or other document naming Debtor as debtor or obligor, except those
which do not relate to the Collateral or which, with respect to the Collateral
are permitted under the Loan Documents (as defined in the Loan Agreement), or
acquiesce or cooperate in the issuance of any warehouse receipt or other
document of title with respect to any Collateral, except those negotiated to
Secured Party or those naming Secured Party as secured party.
5.3 DISPOSITION OF COLLATERAL. Sell, transfer, lease or otherwise
dispose of any Collateral.
5.4 CHANGE IN LOCATION, NAME, LEGAL STRUCTURE. If and to the extent the
same would in any manner impair the creation, perfection or priority of Secured
Party's security interest in the Collateral, (a) maintain items of Collateral,
Records, its chief executive office or residence, or a place of business at a
location other than as specified in Article 3; or (b) change its
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name, mailing address, the nature of its business, or its legal structure.
ARTICLE 6 - EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence of any "Event of Default" as
defined in the Loan Agreement shall constitute an Event of Default hereunder.
(a) Any failure by Debtor to perform any of its duties or
obligations under this Agreement, or breach by Debtor of any of its
representations herein, if such failure or breach continues for 45 days or more
after Debtor's receipt of notice of such failure or breach.
6.2 ACCELERATION AND REMEDIES. Upon the occurrence and during the
continuance of any Event of Default, Secured Party shall be entitled to, at
Secured Party's option, (a) declare all or any part of the Indebtedness
immediately due and payable; (b) exercise any or all of the rights and remedies
available to a secured party under the Uniform Commercial Code or any other
applicable law; and (c) exercise any or all of Secured Party's rights and
remedies provided for in this Agreement and in any other Loan Document. The
obligations of Debtor under this Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any Indebtedness
is rescinded or must otherwise be returned by Secured Party upon, on account of,
or in connection with, the insolvency, bankruptcy or reorganization of Debtor,
or otherwise, all as though such payment had not been made.
6.3 SALE OF COLLATERAL. After the occurrence and during the continuance
of an Event of Default, Secured Party may sell all or any part of the
Collateral, at public or private sales, to itself, a wholesaler, retailer or
investor, for cash, upon credit or for future delivery, and at such price or
prices as Secured Party may deem commercially reasonable. To the extent
permitted by law, Debtor hereby specifically waives all rights of redemption and
any rights of stay or appraisal which it has or may have under any applicable
law in effect from time to time. Any such public or private sales shall be held
at such times and at such place(s) as Secured Party may determine. In case of
the sale of all or any part of the Collateral on credit or for future delivery,
the Collateral so sold may be retained by Secured Party until the selling price
is paid by the purchaser, but Secured Party shall not incur any liability in
case of the failure of such purchaser to pay for the Collateral and, in case of
any such failure, such Collateral may be resold. Secured Party may, instead of
exercising its power of sale, proceed to enforce its security interest in the
Collateral by seeking a judgment or decree of a court of competent jurisdiction.
6.4 DEBTOR'S OBLIGATION UPON DEFAULT. Upon the request of Secured Party
after the occurrence of an Event of Default Debtor will:
(a) Assemble and make available to Secured Party the Collateral
at such place(s) as Secured Party shall designate, segregating all Collateral so
that each item is capable of identification; and
(b) Subject to rights of any previous lessor, permit Secured
Party, by Secured Party's officers, employees, agents and representatives, to
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enter any premises where any Collateral is located, to take possession of the
Collateral and to remove the Collateral or to conduct any public or private sale
of the Collateral, all without any liability of Secured Party for rent or other
compensation for the use of Debtor's premises.
ARTICLE 7 - SPECIAL COLLATERAL PROVISIONS
7.1 PERFORMANCE OF DEBTOR'S OBLIGATIONS. Without having any obligation
to do so, upon reasonable prior notice to Debtor, Secured Party may perform or
pay any obligation which Debtor has agreed to perform or pay under this
Agreement, including, without limitation, the payment or discharge of taxes or
Liens levied or placed on or threatened against the Collateral. In so performing
or paying, Secured Party shall determine the action to be taken and the amount
necessary to discharge such obligations. Debtor shall reimburse Secured Party on
demand for any amounts paid by Secured Party pursuant to this Section, which
amounts shall constitute Indebtedness secured by the Collateral and shall bear
interest from the date of demand at the rate applicable to overdue payments
under the Loan Agreement.
7.2 POWER OF ATTORNEY. For the purpose of protecting, preserving and
enforcing the Collateral and Secured Party's rights under this Agreement, Debtor
hereby irrevocably appoints Secured Party, with full power of substitution, as
its attorney-in-fact with full power and authority to do any act which Debtor is
obligated to do, or Secured Party has the right to do, hereunder; upon the
occurrence and during the continuance of an Event of Default, to enter Debtor's
premises; to give notice of Secured Party's security interest in and to collect
the Collateral and the Proceeds; and to execute and file in Debtor's name any
financing statements, amendments and continuation statements necessary or
desirable to perfect or continue the perfection of Secured Party's security
interests in the Collateral. Debtor hereby ratifies all that Secured Party shall
lawfully do or cause to be done by virtue of this appointment.
7.3 AUTHORIZATION FOR SECURED PARTY TO TAKE CERTAIN ACTION. The power of
attorney created in Section 7.2 is a power coupled with an interest and shall be
irrevocable. The powers conferred on Secured Party hereunder shall be exercised
solely to protect its interests in the Collateral and shall not impose any duty
upon Secured Party to exercise such powers. Secured Party shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers and in no event shall Secured Party or any of its directors, officers,
employees, agents or representatives be responsible to Debtor for any act or
failure to act, except for gross negligence or willful misconduct. Secured Party
may exercise this power of attorney without notice to or assent of Debtor, in
the name of Debtor, or in Secured Party's own name, from time to time in Secured
Party's sole discretion and at Debtor's expense. To further carry out the terms
of this Agreement, Secured Party may upon the occurrence and during the
continuance of an Event of Default:
(a) Execute any statements or documents to take possession of,
and endorse and collect and receive delivery or payment of, any checks, drafts,
notes, acceptances or other instruments and documents constituting the payment
of amounts due and to become due or any performance to be rendered with respect
to the Collateral.
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(b) Sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts, certificates and
statements under any commercial or standby letter of credit, assignments,
leases, bills of sale, or any other documents relating to the Collateral,
including without limitation the Records.
(c) Use or operate Collateral or any other property of Debtor for
the purpose of preserving or liquidating Collateral.
(d) File any claim or take any other action or proceeding in any
court of law or equity or as otherwise deemed appropriate by Secured Party for
the purpose of collecting any and all monies due or securing any performance to
be rendered with respect to the Collateral.
(e) Commence, prosecute or defend any suits, actions or
proceedings or as otherwise deemed appropriate by Secured Party for the purpose
of protecting or collecting the Collateral. In furtherance of this right, upon
the occurrence and during the continuance of an Event of Default Secured Party
may apply for the appointment of a receiver or similar official to operate
Debtor's business.
(f) Prepare, adjust, execute, deliver and receive payment under
insurance claims, and collect and receive payment of and endorse any instrument
in payment of loss or returned premiums or any other insurance refund or return,
and apply such amounts, at Secured Party's sole discretion, toward repayment of
the Indebtedness or replacement of the Collateral.
7.4 APPLICATION OF PROCEEDS. Any Proceeds and other monies or property
received by Secured Party pursuant to the terms of this Agreement or any other
Loan Document may be applied by Secured Party first to the payment of expenses
of collection, including without limitation to reasonable attorneys' fees, and
then to the payment of the Indebtedness in such order of application as Secured
Party may elect.
7.5 DEFICIENCY. If the proceeds of any sale of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all Indebtedness, plus all other sums required to be expended or
distributed by Secured Party, then Debtor shall be liable for any such
deficiency.
7.6 SECURED PARTY TRANSFER. Upon the transfer of all or any part of the
Indebtedness, Secured Party may transfer all or any part of its interest in the
Collateral and shall be fully discharged thereafter from all liability and
responsibility with respect to such interest in the Collateral so transferred,
and the transferee shall be vested with all the rights and powers of Secured
Party hereunder with respect to such interest in the Collateral so transferred.
ARTICLE 8 - GENERAL PROVISIONS
8.1 NOTICES. Any notice given by any party under this Agreement shall be
given in the manner prescribed in the Loan Agreement.
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8.2 BINDING EFFECT. This Agreement shall be binding upon Debtor, its
permitted successors, representatives and assigns, and shall inure to the
benefit of Secured Party and its successors, representatives and assigns.
8.3 RIGHTS CUMULATIVE. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
8.4 UNENFORCEABLE PROVISIONS. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be so only as to such
jurisdiction and only to the extent of such prohibition or unenforceability, but
all the remaining provisions of this Agreement shall remain valid and
enforceable.
8.5 GOVERNING LAW, WAIVER OF NOTICE. Except as may be otherwise provided
by the Uniform Commercial Code, this Agreement shall be governed by and
construed in accordance with the internal laws of the State of California.
8.6 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, is intended by Debtor and Secured Party as the final expression of
Debtor's obligations to Secured Party in connection with the Collateral and
supersedes all prior understandings or agreements concerning the subject matter
hereof. This Agreement may be amended only by a writing signed by Debtor and
accepted by Secured Party in writing.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth in the preamble.
DIGITAL GENERATION SYSTEMS, INC. VENTURE LENDING & LEASING, INC.
By: ________________________
Xxxxxx X. Xxxxxxxx By: _______________________
Chief Financial Officer Xxxxxxxx X. Xxxxxxxxx
President
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SCHEDULE 1 TO SECURITY AGREEMENT
DESCRIPTION OF EQUIPMENT
QUANTITY ARTICLE MAKE Y. MFG. MODEL SERIAL OR MOTOR NO.
-------- ------- ---- ------- ----- -------------------
See attached continuation to Schedule 1
together with all improvements, replacements, accessions and additions thereto,
wherever located, and all Proceeds thereof arising from the sale, lease, rental
or other use or disposition of any such property, including all rights to
payment with respect to insurance or condemnation, returned premiums, or any
cause of action relating to any of the foregoing.
DIGITAL GENERATION SYSTEMS, INC.
By: _______________________________
Xxxxxx X. Xxxxxxxx
Chief Financial Officer
VENTURE LENDING & LEASING, INC.
By: _______________________________
Xxxxxxxx X. Xxxxxxxxx
President
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EXHIBIT A TO FINANCING STATEMENT
BETWEEN
DIGITAL GENERATION SYSTEMS, INC.
AS DEBTOR,
AND
VENTURE LENDING & LEASING, INC.,
AS SECURED PARTY
------------------------------------
Item 6 continued:
All of Debtor's right, title and interest in and to the Collateral, as
such term is defined below.
"COLLATERAL" means all Debtor's Equipment and Fixtures now owned or
hereafter acquired, wherever located, and whether held by Debtor or any third
party, and all proceeds and products thereof, including all insurance and
condemnation proceeds ("Proceeds"), and all monies now or at any time hereafter
in the possession or under the control of Secured Party or a bailee or affiliate
of Secured Party, including any cash collateral in any cash collateral or other
account, and all Records relating or useful to, or used in connection with any
of the foregoing.
"EQUIPMENT" means all of Debtor's specific equipment identified and
described on Schedule 1 attached to this Agreement and incorporated herein by
reference (as such Schedule may be amended or supplemented from time to time),
all replacements, parts, accessions and additions thereto, and all proceeds
thereof arising from the sale, lease, rental or other use or disposition
thereof, including all rights to payment with respect to insurance or
condemnation, returned premiums, or any cause of action relating to any of the
foregoing.
"FIXTURES" means all items of Equipment that are so related to the real
property upon which they are located that an interest in them arises under real
property law, and all proceeds thereof arising from the sale, lease, rental or
other use or disposition thereof.
"RECORDS" means all Debtor's computer programs, software, hardware,
source codes and data processing information, all written documents, books,
invoices, ledger sheets, financial information and statements, and all other
writings concerning Debtor's business.
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EXHIBIT D
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE
112,500 SHARES OF COMMON STOCK OF
DIGITAL GENERATION SYSTEMS, INC.
(Void after December 31, 2002)
This certifies that VENTURE LENDING & LEASING, INC., a Maryland
corporation, or assigns (the "Holder"), for value received, is entitled to
purchase from DIGITAL GENERATION SYSTEMS, INC., a California corporation (the
"Company"), 112,500 fully paid and nonassessable shares of the Company's Common
Stock ("Common Stock") for cash at a price of $8.00 per share (the "Stock
Purchase Price") at any time or from time to time up to and including 5:00 p.m.
(Pacific time) on December 31, 2002 (the "Expiration Date"), upon surrender to
the Company at its principal office at 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX
00000 (or at such other location as the Company may advise Holder in writing) of
this Warrant properly endorsed with the Form of Subscription attached hereto
duly filled in and signed and upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificate; Payment for Shares.
(a) Unless an election is made pursuant to clause (b) of this
Section 1, this Warrant shall be exercisable at the option of the Holder, at any
time or from time to time, on or before the Expiration Date for all or any
portion of the shares of Common Stock (but not for a fraction of a share) which
may be purchased hereunder for the Stock Purchase Price multiplied by the number
of shares to be purchased. The Company agrees that
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the shares of Common Stock purchased under this Warrant shall be and are deemed
to be issued to the holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Common Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. Except as provided in clause (b) of this Section
1, in case of a purchase of less than all the shares which may be purchased
under this Warrant, the Company shall cancel this Warrant and execute and
deliver a new Warrant or Warrants of like tenor for the balance of the shares
purchasable under the Warrant surrendered upon such purchase to the Holder
hereof within a reasonable time. Each stock certificate so delivered shall be in
such denominations of Common Stock as may be requested by the Holder hereof and
shall be registered in the name of such Holder or such other name as shall be
designated by such Holder, subject to the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment
of the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect,
at any time on or before the Expiration Date, to receive, through conversion of
this Warrant or any portion hereof into that number of shares of Common Stock
equal to the quotient of: (i) the difference between (A) the Per Share Price (as
hereinafter defined) of the Common Stock, less (B) the Stock Purchase Price then
in effect, multiplied by the number of shares of Common Stock the Holder would
otherwise have been entitled to purchase hereunder pursuant to clause (a) of
this Section 1 (or such lesser number of shares as the Holder may designate in
the case of a partial exercise of this Warrant); over (ii) the Per Share Price.
(c) For purposes of clause (b) of this Section 1, "Per Share
Price" means (i) if the Company's Common Stock is then listed or admitted to
trading on any national securities exchange or traded on any national market
system, the average of the closing bid and asked prices of the Company's Common
Stock as reported on such exchange or market system for the ten (10) consecutive
trading days prior to the date of the Holder's election to convert hereunder;
(ii) if this Warrant is being converted in conjunction with a public offering of
stock, the price to the public per share pursuant to the offering; or (iii) if
no shares of the Company's Common Stock are listed or admitted to trading on any
national securities exchange or traded on any national market system, the price
per share which the Company would obtain from a willing buyer for shares sold by
the Company from authorized but unissued shares as such price
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shall be agreed upon by the Holder and the Company or, if agreement cannot be
reached within ten (10) business days of the Holder's election hereunder, as
such price shall be determined by a panel of three (3) appraisers, one (1) to be
chosen by the Company, one (1) to be chosen by the Holder and the third to be
chosen by the first two (2) appraisers. If the appraisers cannot reach agreement
within 30 days of the Holder's election hereunder, then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall constitute the Per Share Price. In the event either party fails to
choose an appraiser within 30 days of the Holder's election hereunder, then the
appraisal of the sole appraiser shall constitute the Per Share Price. Each party
shall bear the cost of the appraiser selected by such party and the cost of the
third appraiser shall be borne one-half by each party. In the event either party
fails to choose an appraiser, the cost of the sole appraiser shall be borne
one-half by each party.
2. Limitation on Transfer.
(a) The Warrant and the Common Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act. Each
holder of this Warrant or the Common Stock issuable hereunder will cause any
proposed transferee of the Warrant or Common Stock to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Section 2.
(b) Each certificate representing this Warrant
or the Common Stock shall (unless otherwise permitted by the provisions of this
Section 2 or unless such securities have been registered under the Securities
Act or sold under Rule 144) be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(c) The Holder of this Warrant and each person to whom this
Warrant is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement under
the Securities Act was in effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an
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effective registration statement under the Securities Act, (ii) Rule 144 under
the Securities Act (or any other rule under the Securities Act relating to the
disposition of securities), or (iii) an opinion of counsel, reasonably
satisfactory to counsel for the Company, that an exemption from such
registration is available.
3. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without material violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Common Stock may be listed. The Company will not take any action which
would result in any adjustment of the Stock Purchase Price (as defined in
Section 4 hereof) (i) if the total number of shares of Common Stock issuable
after such action upon exercise of all outstanding warrants, together with all
shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Company's Articles of Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock Purchase
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 4. Upon each adjustment of the Stock Purchase
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Stock Purchase
Price resulting from such adjustment.
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4.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) by way of dividend or other distribution any shares of
stock or other securities, whether or not such securities are at any time
directly or indirectly convertible into or exchangeable for Common Stock, or any
rights or options to subscribe for, purchase or otherwise acquire any of the
foregoing, or
(b) any cash paid or payable otherwise than as a cash
dividend, or
(c) additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification, combination of
shares or similar corporate rearrangement, (other than shares of Common Stock
issued as a stock split, adjustments in respect of which shall be covered by the
terms of Section 4.1 above),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefore, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (b) and (c) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares and/or all other additional stock and other
securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be
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entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby. In any such case, appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Stock Purchase Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be possible, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company will not effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or the corporation purchasing such assets
shall assume by written instrument, executed and mailed or delivered to the
registered Holder hereof at the last address of such Holder appearing on the
books of the Company, the obligation to deliver to such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase.
4.4 Intentionally Deleted.
4.5 Notice of Adjustment. Upon any adjustment of the Stock
Purchase Price, and/or any increase or decrease in the number of shares
purchasable upon the exercise of this Warrant the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as shown on the
books of the Company. The notice shall be signed by the Company's chief
financial officer and shall state the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
4.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon any of
its stock;
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(b) the Company shall declare any dividend upon its stock
payable in stock, or make any special dividend or other distribution to the
holders of its stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other
action, notice of which is actually provided to holders of the Common Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (i) at least 20 day's prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding- up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of stock shall be entitled
thereto. Any notice given in accordance with the foregoing clause (ii) shall
also specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action as the case may be. Notwithstanding
anything to the contrary, the Company's failure to give any notice required
under Section 4.5 or 4.6 shall not affect the validity of any Company action
requiring such notice to be given.
4.7 Certain Events. If in the reasonable judgment of the
Company's Board of Directors any change in the outstanding Common Stock of the
Company or any other event occurs as to which the other provisions of this
Section 4 are not strictly
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applicable or if strictly applicable would not fairly protect the purchase
rights of the Holder of the Warrant in accordance with the essential intent and
principles of such provisions, then the Board of Directors of the Company shall
make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price and/or the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for shares of Common Stock upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
6. Closing of Books. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
7. No Voting or Dividend Rights; Limitation of Liability. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof the
right to vote or to consent as a shareholder in respect of meetings of
shareholders for the election of directors of the Company or any other matters
or any rights whatsoever as a shareholder of the Company. No dividends or
interest shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provisions hereof, in
the absence of affirmative action by the holder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder for the Stock Purchase
Price or as a shareholder of the Company, whether such liability is asserted by
the Company or by its creditors.
8. Amendment of Articles of Incorporation. Unless the holder of this
Warrant consents thereto in writing, the Company shall not amend its Articles of
Incorporation prior to the exercise of this Warrant in any manner that would
adversely affect the holder's rights hereunder.
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9. Registration Rights. The Holder hereof shall be entitled, with respect
to the shares of Common Stock issued upon exercise hereof to all of the
registration rights set forth in the Amendment and Restatement No. 4 to Rights
Agreement dated as of July 27, 1995 to the same extent and on the same terms and
conditions as possessed by the Holders thereunder pursuant to Section 1.3
("Company Registration") thereto. The Company shall take such action as may be
reasonably necessary to assure that the granting of such registration rights to
the Holder does not violate the provisions of such agreement or any of the
Company's charter documents or rights of prior grantees of registration rights.
10. Rights and Obligations Survive Exercise of Warrant.
The rights and obligations of the Company, of the Holder of this Warrant and of
the holder of shares of Common Stock issued upon exercise of this Warrant,
contained in Sections 8 and 9 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
12. Notices. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof or the Company shall be deemed to
have been given (i) upon receipt if delivered personally or by courier, (ii)
upon confirmation of receipt if by telecopy, or (iii) three business days after
deposit in the U.S. mail, with postage prepaid and certified or registered, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant.
13. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assign of the holder hereof. The Company will, at the time of the exercise of
this Warrant, in whole or in part, upon request of the Holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
Holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Common Stock) to which the holder hereof shall
continue to be entitled after such exercise in accordance with this Warrant;
provided, that the failure of the holder hereof to
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make any such request shall not affect the continuing obligation of the Company
to the Holder hereof in respect of such rights.
14. Descriptive Headings and Governing Law. The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the State of California.
15. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
17. Representations of Holder. With respect to this Warrant, Holder by
acceptance of this Warrant represents and warrants to, and covenants with, the
Company as follows:
17.1 Experience. It is experienced in evaluating and investing
in companies engaged in businesses similar to that of the Company; it
understands that investment in the Warrant involves substantial risks; it has
made detailed inquiries concerning the Company, its business and services, its
officers and its personnel; the officers of the Company have made available to
Holder any and all written information it has requested; the officers of the
Company have answered to Holder's satisfaction all inquiries made by it; in
making this investment it has relied upon information made available to it by
the Company; it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of investment in
the Company and it is able to bear the economic risk of that investment; and it
is an "accredited investor", as that term is defined in Section 501 of
Regulation D promulgated under the Securities Act of 1933, as amended.
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17.2 Investment. It is acquiring the Warrant for investment for
its own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of Common
Stock issuable upon exercise thereof, have not been registered under the
Securities Act of 1933, as amended, nor qualified under applicable state
securities laws.
17.3 Rule 144. It acknowledges that the Warrant and the Common
Stock must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. It has
been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act.
17.4 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
17.5 Neither Holder nor anyone acting on its behalf will take any
action hereafter that would cause the loss of the exemptions referred to in
Section 18.3.
18. Additional Representations and Covenants of the Company. The
Company hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite corporate
power and corporate authority to issue this Warrant and to carry out and perform
its obligations hereunder.
18.2 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this has been taken. This
Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms (except as may be limited by bankruptcy, insolvency
and similar laws affecting the enforcement of creditors' rights in general, and
subject to general principles of equity).
18.3 Offering. Subject in part to the truth and accuracy of
Holder's representations set forth in Section 17 hereof, the offer, issuance and
sale of the Warrant is, and the issuance of Common Stock upon exercise of the
Warrant will be exempt from the registration requirements of the Securities Act,
and are exempt from the qualification requirements of any applicable state
securities laws; and neither the Company nor anyone acting on its behalf will
take any action hereafter that would cause the loss of such exemptions.
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18.4 Stock Issuance. Upon exercise of the Warrant, the Company
will use its reasonable commercial efforts to cause stock certificates
representing the shares of Common Stock purchased pursuant to the exercise to be
issued in the individual names of Holder, its nominees or assignees, as
appropriate at the time of such exercise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its officers, thereunto duly authorized this ___ day of
January, 1997.
DIGITAL GENERATION SYSTEMS, INC.
By:________________________________
Title:_____________________________
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:_____________________________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, __________________________________ (_____) (1)
shares of Common Stock of __________________________________ and herewith makes
payment of _____________________________________ Dollars ($________) therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to, __________________________________________, whose address is
__________________________.
The undersigned represents that it is acquiring such Common Stock
for its own account for investment and not with a view to or for sale in
connection with any distribution thereof (subject, however, to any requirement
of law that the disposition thereof shall at all times be within its control.
DATED:______________________
____________________________________(Signature must
conform in all respects to name of holder as specified on
the face of the Warrant)
____________________________________________________
____________________________________________________
(Address)
---------------------
(1) Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of the Warrant, may be deliverable upon exercise.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within
Warrant, hereby sells, assigns and transfers all of the rights of the
undersigned under the within Warrant, with respect to the number of shares of
Common Stock covered thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
Dated: ____________________________________________
____________________________________________
(Signature must conform in all
respects to name of holder
as specified on the face of the Warrant)
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