-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C8xRrYpWADY2oGmJ6tBQvS1qWBJtTiliHoBTwbxJqMU2Bhx9kVUenrQa5XalZcwC iFe67SV504KIvDVt0G6i1A== 0000928385-01-000157.txt : 20010123 0000928385-01-000157.hdr.sgml : 20010123 ACCESSION NUMBER: 0000928385-01-000157 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010122 GROUP MEMBERS: GINSBURG SCOTT K GROUP MEMBERS: MOON DOGGIE FAMILY PARTNERSHIP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL GENERATION SYSTEMS INC CENTRAL INDEX KEY: 0000934448 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 943140772 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-49603 FILM NUMBER: 1512919 BUSINESS ADDRESS: STREET 1: 875 BATTERY ST STREET 2: STE 1850 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4155466600 MAIL ADDRESS: STREET 1: 875 BATTERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GINSBURG SCOTT K CENTRAL INDEX KEY: 0001013565 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 17340 CLUB HILL DR CITY: DALLAS STATE: TX ZIP: 75248 MAIL ADDRESS: STREET 1: 17340 CLUB HILL DR CITY: DALLAS STATE: TX ZIP: 75248 SC 13D/A 1 0001.txt DIGITAL GENERATION SYSTEMS CUSIP No. 253921100 Page 1 of 9 Pages UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (AMENDMENT NO. 5) DIGITAL GENERATION SYSTEMS, INC. ________________________________________________________________________________ (Name of Issuer) Common Stock, no par value per share ________________________________________________________________________________ (Title of Class of Securities) 253921100 _______________________________________________________________ (CUSIP Number) Scott K. Ginsburg Digital Generation Systems, Inc. 875 Battery Street San Francisco, California 94111 (415) 276-6600 ________________________________________________________________________________ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to: John D. Watson, Jr. Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 (202) 637-2200 January 18, 2001 _______________________________________________________________ (Date of Event which Requires Filing of this Amendment) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. CUSIP No. 253921100 Page 2 of 9 Pages - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Scott K. Ginsburg - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [X] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 22,028,594 SHARES ----------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 2,920,134 1/ OWNED BY EACH SOLE DISPOSITIVE POWER 9 REPORTING 25,754,974 2/ PERSON ----------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 5,928,661 3/ - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 31,683,635 2/3/ - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 43.3% 2/3/ - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------ 1/ Consists of 2,920,134 shares held of record by Moon Doggie Family Partnership, a partnership of which Mr. Ginsburg is the sole general partner. Mr. Ginsburg, in such capacity, holds voting and dispositive power over these shares. 2/ Includes a warrant for 2,025,000 shares of StarGuide Common Stock which will be exchanged in the merger for a warrant for 3,509,730 shares of Issuer Common Stock, and an option for 250,000 shares of Common Stock of StarGuide (of which only 50% is immediately exercisable and included for beneficial ownership purposes herein) which will be exchanged in the merger for an option to purchase 433,300 shares of Issuer Common Stock. See Item 6. CUSIP No. 253921100 Page 3 of 9 Pages - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Moon Doggie Family Partnership - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [X] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS AF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF -0- SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 2,920,134 1/ OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING -0- PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 5,928,661 3/ - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,928,661 3/ - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.2% 3/ - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* PN - ------------------------------------------------------------------------------ 3/ Includes an additional 3,008,527 shares of Issuer Common Stock which are subject to warrants issued to Moon Doggie Family Partnership. These warrants are immediately exercisable. See Item 5. CUSIP No. 253921100 Page 4 of 9 Pages ITEM 1. SECURITY AND ISSUER. This Amendment No. 5 to Schedule 13D relates to the Common Stock, no par value per share (the "Common Stock"), of Digital Generation Systems, Inc., a California corporation (the "Issuer"). The Issuer's principal executive offices are located at 875 Battery Street, San Francisco, California, 94111. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is filed by Scott K. Ginsburg and by Moon Doggie Family Partnership, L.P., (each a "Reporting Person" and together, the "Reporting Persons"). (b) The address of the Reporting Persons is 17340 Club Hill Drive, Dallas, Texas, 75248. (c) Present Principal Business or Employment: (1) Scott K. Ginsburg: (i) Investor; (ii) Chairman of the Board of Directors of the Issuer; (iii) Chairman of the Board of Directors of StarGuide Digital Networks, Inc. 300 East Second Street Suite 1510 Reno, Nevada 89501 (2) Moon Doggie Family Investment Partnership Partnership, L.P. ("Moon Doggie"): (d) and (e) During the last five years neither Reporting Person has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor (ii) been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction, and is or was, as a result of such proceeding, subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. (f) Mr. Ginsburg is a citizen of the United States. Moon Doggie is a Delaware partnership. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Mr. Ginsburg's shares of StarGuide Digital Networks, Inc. ("StarGuide") Common Stock exchanged for shares of Issuer Common Stock, pursuant to the Agreement and Plan of Merger, in the stock-for-stock, reverse triangular merger with SG Nevada Merger Sub Inc., a subsidiary of Issuer. See Item 4. ITEM 4. PURPOSE OF TRANSACTION Mr. Ginsburg initially acquired shares of Common Stock of the Issuer as a result of his belief that the Common Stock represented an attractive investment. Mr. Ginsburg subsequently concluded that the Issuer could benefit from his radio broadcasting management background and experience and his strategic planning skills. As a result, Mr. Ginsburg entered into negotiations with the Issuer regarding expanding the role to be played by Mr. Ginsburg in the Issuer and its business. Pursuant to these negotiations, Mr. Ginsburg caused Moon Doggie to CUSIP No. 253921100 Page 5 of 9 Pages purchase the Common Stock of the Issuer that it presently owns with the intent that Mr. Ginsburg, directly and through Moon Doggie, would effect the control and management of the Issuer. Substantially contemporaneously with such purchase, Mr. Ginsburg was named Chairman and CEO of the Issuer. Mr. Ginsburg believes that his holding or controlling a significant interest in the Issuer assists in aligning the interests of management and shareholders. While he no longer serves as CEO, in his role as Chairman, Mr. Ginsburg remains responsible for the strategic direction of the Issuer, the development and implementation of its consolidation strategy and developing and maintaining financial community relationships. In a separate transaction, Mr. Ginsburg also acquired voting control of StarGuide, a privately held company that, through an affiliated partnership, is engaged in businesses that may be complementary to business conducted or proposed to be conducted by the Issuer. On April 4, 2000, with Mr. Ginsburg's approval, StarGuide submitted a written, non-binding indication of interest regarding a possible combination of StarGuide and the Issuer in a tax-free, stock-for-stock reorganization. See Exhibit 11. The indication of interest was submitted in response to a solicitation by the financial advisor to a special committee of the Issuer's board of directors. The indication of interest proposes that representatives of the Issuer and StarGuide promptly commence discussions regarding the structure and terms of such a combination. On July 7, 2000, the Board of Directors of StarGuide, including Mr. Ginsburg, approved a proposed combination of StarGuide and the Issuer in a tax-free, stock-for-stock, reverse triangular merger, and authorized StarGuide to execute an Agreement and Plan of Merger by and among Issuer, SG Nevada Merger Sub Inc., a subsidiary of the Issuer formed for purposes of the merger, and StarGuide. On July 7, 2000, following the unanimous recommendation of the special committee to the Board of Directors, the Board of Directors of Issuer unanimously voted to approve the Agreement and Plan of Merger. See Exhibit 12. On July 7, 2000, Mr. Ginsburg also executed two Voting Agreements, one in which he agreed to vote his shares of the Issuer's stock in favor of the merger, and one in which he agreed to vote his shares of StarGuide stock in favor of the merger. See Exhibits 13 and 14. He also executed a Lock-Up Agreement, in which he agreed that he would not sell or otherwise dispose of shares of the Issuer owned by him following the merger, provided that after 60 days following the merger 15% of the shares will no longer be subject to the lock-up, after 90 days following the merger 30% of the shares will no longer be subject to the lock-up, after 120 days following the merger 50% of the shares will no longer be subject to the lock-up, after 150 days following the merger 75% of the shares will no longer be subject to the lock-up, and after 180 days following the merger none of the shares will be subject to the lock-up. See Exhibit 15. On November 21, 2000, the shareholders of Issuer voted to approve the Agreement and Plan of Merger. On November 21, 2000, the shareholders of StarGuide also voted to approve the Agreement and Plan of Merger. On January 18, 2001, the merger closed, and as a result, the holders of StarGuide securities prior to the merger will receive in exchange for their StarGuide securities (at an exchange ratio of 1.7332 shares of Issuer Common Stock per share of StarGuide Common Stock) shares of the Issuer's Common Stock totaling 59.25% of Issuer's Common Stock following the merger, on a fully diluted basis, with the holders of Common Stock of the Issuer prior to the merger holding the remaining 40.75% of the Issuer's Common Stock after the merger. Thus, based on his present beneficial ownership of shares of both StarGuide and the Issuer, Mr. Ginsburg will own approximately 43.3% of the total outstanding shares of the Issuer following the exchange of StarGuide shares for shares of Issuer. The Reporting Persons review their investment on an ongoing basis. Such continuing review may result in the Reporting Persons acquiring additional shares of Common Stock of the Issuer, or selling all or a portion of their shares of Common Stock, in the open market or in privately negotiated transactions with the Issuer or third parties or maintaining their holdings at current levels. Such review also may result in the Reporting Persons formulating plans or making proposals regarding actions set forth in Item 4 of Schedule 13D (which are listed in clauses (i) through (x) below). Any action taken by the Reporting Persons will be dependent upon a review of numerous factors, including, among other things, the availability of shares of the Common Stock for purchase and the price levels of such shares; general market and economic conditions; ongoing evaluation of the Issuer's business operations and investment opportunities; the actions of others in management and the Board of Directors of the Issuer; and other future developments. Such transactions or actions, if any, would be made at such times and in such manner as the Reporting Persons, in their discretion, deem advisable. Other than described above, neither Mr. Ginsburg nor Moon Doggie has any present plans or proposals which relate to or would result in: (i) the acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Issuer; (iii) a sale or transfer of a material amount of assets of the Issuer; (iv) any change in the present Board of Directors or management of the Issuer, including any plans or proposals to change the number or terms of Directors or to fill any existing vacancies on the Board; (v) any material change in the present capitalization or dividend policy of the Issuer; (vi) any other material change in the Issuer's business or corporate structure; (vii) changes in the Issuer's certificate of incorporation or by-laws or other actions which may impede the acquisition of control of the Issuer by any persons; (viii) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (ix) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or (x) any action similar to those enumerated above. CUSIP No. 253921100 Page 6 of 9 Pages ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Scott K. Ginsburg: 31,683,635 shares of Common Stock representing approximately 43.3% of the outstanding Common Stock. See Item 6. This amount includes warrants for 2,025,000 shares of StarGuide Common Stock, which pursuant to the Agreement and Plan of Merger, will be exchanged for a warrant for 3,509,730 shares of Issuer Common Stock. In addition, this amount includes an option for 250,000 shares of StarGuide (of which only 50% is immediately exercisable and included in the above number) which will be exchanged in the merger for also an option of Issuer for 433,300 shares of Issuer Common Stock. See Item 6. This amount also includes 3,008,527 shares of Common Stock which are subject to warrants issued to Moon Doggie, which warrants are currently exercisable, and 2,920,134 shares of Common Stock held of record by Moon Doggie, of which Mr. Ginsburg is the sole general partner. Mr. Ginsburg, in his capacity as sole general partner, holds voting and dispositive power over these shares. By virtue of Mr. Ginsburg's control of Moon Doggie, Mr. Ginsburg may be deemed to have beneficial ownership of the shares held of record by Moon Doggie. By agreement of all of the investors, the warrants to purchase 120,867 shares of Common Stock of the Issuer, which were issued to Mr. Ginsburg on December 17, 1999, were rescinded and are not outstanding. Moon Doggie: 5,928,661 shares of Common Stock of the Issuer representing approximately 8.3% of the outstanding Common Stock. This amount also includes 3,008,527 shares of Common Stock which are subject to warrants issued to Moon Doggie, which warrants are currently exercisable. See Item 6. (b) Scott K. Ginsburg has sole voting power over 22,028,594 shares of Issuer Common Stock, representing approximately 31.8% of the outstanding Common Stock of Issuer. Mr. Ginsburg has sole dispositive power over 25,754,974 shares of Issuer Common Stock, representing approximately 35.2% of the outstanding Common Stock of Issuer. Mr. Ginsburg has shared voting power over 2,920,134 shares of Issuer Common Stock, representing approximately 4.2% of the outstanding Common Stock of Issuer, and shared dispositive power over 5,928,661 shares of Issuer Common Stock, representing approximately 8.2% of the outstanding Common Stock of Issuer. Mr. Ginsburg may be deemed to have beneficial ownership of the shares held of record by Moon Doggie. See response to Item 5(a) for additional information. Moon Doggie does not have sole voting or dispositive power over any of its shares of Issuer Common Stock. Moon Doggie has shared voting power over 2,920,134 shares of Issuer Common Stock, representing approximately 4.2% of the outstanding Common Stock of Issuer. Moon Doggie has shared dispositive power over 5,928,661 shares of Issuer Common Stock, representing approximately 8.2% of the outstanding Common Stock of Issuer. Because Mr. Ginsburg is the sole general partner of Moon Doggie and as such, controls Moon Doggie, Moon Doggie may be deemed to share such voting and dispositive power over these shares of Issuer Common Stock with Mr. Ginsburg. See response to Item 5(a) for additional information. (c) On December 17, 1999, Mr. Ginsburg purchased 241,733 shares of Common Stock of the Issuer for an aggregate purchase price of approximately $1,250,000, or approximately $5.171 per share, pursuant to the Common Stock Purchase Agreement. On January 18, 2001, the merger between Issuer, SG Nevada Merger Sub Inc. (a subsidiary of Issuer) and StarGuide closed. Pursuant to the Agreement and Plan of Merger, Mr. Ginsburg will receive 1.7332 shares of Issuer Common Stock for each share of StarGuide Common Stock. See response to Items 4 and 5(a) for more information. (d) Pursuant to a Pledge Agreement between United States Media Corporation ("USMC") and Mr. Ginsburg, under which 9,005,240 shares of StarGuide Common Stock owned by Mr. Ginsburg have been pledged to USMC as collateral, USMC has the right to receive as collateral certain forms of dividends and the proceeds from the sale of such shares. See Item 6(g) for more information. (e) [Not applicable.] ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. (a) On August 12, 1998, the Issuer and Mr. Ginsburg entered into the First Common Stock Subscription Agreement for the purchase of 714,285 shares of Common Stock at a purchase price of $2.80 per share. In connection with such purchase, the Issuer granted Mr. Ginsburg certain registration rights with respect to the purchased shares. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 1 which is hereby incorporated by reference. (b) On September 25, 1998, the Issuer and Mr. Ginsburg entered into the Second Common Stock Subscription Agreement for the purchase of shares of Common Stock with an aggregate purchase price not to exceed $8 million, nor to be less than $6 million. This agreement was amended by that certain letter agreement dated December 9, 1998 by and between the Issuer and Moon Doggie. In connection with such purchase, the Issuer has granted to Moon Doggie certain demand registration rights which may not be exercised for a period of sixty days following Moon Doggie's purchase of such shares. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 2 and Exhibit 3, each of which is hereby incorporated by reference. (c) In connection with the purchase of shares of Common Stock by Moon Doggie pursuant to the Second Common Stock Subscription Agreement, the Issuer and Moon Doggie entered into that certain Warrant Purchase Agreement dated December 9, 1998, pursuant to which the Issuer has issued to Moon Doggie (i) a warrant to purchase up to 1,460,067 shares of Common Stock at a purchase price of $3.25 per share (subject to certain adjustments) (the "First Warrant") and (ii) a warrant to purchase up to 1,548,460 shares of Common Stock at a purchase price of $3.25 per share (subject to certain adjustments) (the "Second Warrant). The First Warrant is void after December 9, 2001. CUSIP No. 253921100 Page 7 of 9 Pages The Second Warrant is void after December 9, 2003. Pursuant to a resolution of the Board of Directors of Issuer, both the First Warrant and the Second Warrant are immediately exercisable. The foregoing summary of such agreements is qualified in its entirety by such references to Exhibit 4, Exhibit 5 and Exhibit 6, each of which is hereby incorporated by reference. (d) On December 17, 1999, the Issuer, Mr. Ginsburg, and certain other investors entered into the Common Stock Purchase Agreement, pursuant to which Mr. Ginsburg agreed to purchase 241,733 shares of Common Stock at a purchase price of approximately $5.171 per share. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 9, which is hereby incorporated by reference. By agreement of all of the investors, the warrants to purchase 120,867 shares of Common Stock of the Issuer, which were issued to Mr. Ginsburg on December 17, 1999, were rescinded and are not outstanding. (e) On December 17, 1999, the Issuer, Mr. Ginsburg, and certain other investors entered into a Registration Rights Agreement, granting Mr. Ginsburg certain registration rights with respect to the shares purchased by Mr. Ginsburg pursuant to the Common Stock Purchase Agreement. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 10, which is hereby incorporated by reference. (f) On July 7, 2000, Mr. Ginsburg executed two Voting Agreements, one in which he agreed to vote his shares of the Issuer's stock in favor of a merger between StarGuide and the Issuer, and one in which he agreed to vote his shares of StarGuide stock in favor of such merger. He also executed a Lock-Up Agreement, in which he agreed that he would not sell or otherwise dispose of his shares of the Issuer following the merger, subject to the following schedule: after 60 days following the merger 15% of the shares will no longer be subject to the lock-up, after 90 days following the merger 30% of the shares will no longer be subject to the lock-up, after 120 days following the merger 50% of the shares will no longer be subject to the lock-up, after 150 days following the merger 75% of the shares will no longer be subject to the lock-up, and after 180 days following the merger none of the shares will be subject to the lock-up. The foregoing summary of such agreements is qualified in its entirety by references to Exhibit 13, Exhibit 14, and Exhibit 15, each of which is hereby incorporated by reference. (g) In connection with the purchase of shares of StarGuide Common Stock in 1998, Mr. Ginsburg entered into a Pledge Agreement pursuant to which 9,005,240 shares of StarGuide Common Stock are pledged to USMC as security for a promissory note from Mr. Ginsburg in favor of USMC. Pursuant to the Agreement and Plan of Merger, the 9,005,240 shares will be exchanged for 15,607,882 shares of Issuer Common Stock. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 16, which is hereby incorporated by reference. (h) Mr. Ginsburg currently holds a warrant for the right to purchase 2,025,000 shares of StarGuide Common Stock at a purchase price of $2.50 per share. This warrant is exercisable immediately. Pursuant to the Agreement and Plan of Merger, the warrant will be exchanged for a warrant to purchase 3,509,730 shares of Issuer Common Stock. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 17, which is hereby incorporated by reference. (i) On November 29, 1999, Mr. Ginsburg received from StarGuide an option to purchase 250,000 shares of StarGuide common stock at an exercise price of $3.75 per share. Pursuant to the terms of the option, 50% of the option was exercisable as of November 29, 2000 and the remaining 50% shall be exercisable as of November 29, 2001. Under the terms of the Agreement and Plan of Merger, this option will be exchanged for an option to purchase 433,300 shares of Issuer Common Stock. The foregoing summary of such agreement is qualified in its entirety by reference to Exhibit 18, which is hereby incorporated by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 16 Pledge Agreement, between Scott K. Ginsburg and United States Media Corporation, dated as of December 8, 1998. Exhibit 17 Warrant No. ___ to purchase common stock of StarGuide Digital Networks, Inc. Exhibit 18 Stock Option Agreement, between StarGuide Digital Networks, Inc. and Scott K. Ginsburg, dated as of November 29, 1999. CUSIP No. 253921100 Page 8 of 9 Pages SIGNATURE After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Scott K. Ginsburg /s/ Scott K. Ginsburg ---------------------- Dated: January 18, 2001 Dated: January 18, 2001 CUSIP No. 253921100 Page 9 of 9 Pages SIGNATURE After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Moon Doggie Family Partnership By: /s/ Scott K. Ginsburg -------------------------- Name: Scott K. Ginsburg Title: General Partner Dated: January 18, 2001 EX-16 2 0002.txt PLEDGE PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as of December 8, 1998 by Scott K. Ginsburg, a resident of the State of Texas in the United States of America (the "Pledgor"), in favor of United States Media Corporation (the "Secured Party"), the holder (in such capacity, the "Holder") of the Pledgor's Limited Recourse Secured Promissory Note of even date herewith (as amended, modified, and supplemented from time to time, the "Note"). Capitalized terms used and not defined herein shall have the meanings given to such terms in the Note. W I T N E S S E T H: WHEREAS, concurrently herewith the Pledgor is purchasing the shares of capital stock set forth on Schedule I hereto (the "Pledged Shares") of StarGuide Digital Networks, Inc. (the "Issuer") from the Holder pursuant to and in accordance with the terms and conditions of the Securities Purchase Agreement dated August 20, 1998, among the Pledgor, the Holder, and certain other persons (as amended, modified, and supplemented from time to time, the "Purchase Agreement"); and WHEREAS, concurrently herewith the Pledgor is making and delivering the Note to the Holder in payment of the purchase price for the Pledged Shares; and WHEREAS, the terms of the Purchase Agreement require that the Pledgor (i) pledge to the Secured Party, and grant to the Secured Party a security interest in, the Pledged Collateral (as defined herein) and (ii) execute and deliver this Agreement to secure the payment and performance by the Pledgor of all of the obligations of the Pledgor under the Note (the "Obligations"). AGREEMENT NOW, THEREFORE, in consideration of the premises, and in order to induce the Holder to accept the Note, the Pledgor hereby agrees with the Secured Party as follows: SECTION 1. Pledge. The Pledgor hereby pledges to the Secured Party, ------ and grants to the Secured Party, a continuing first priority security interest in all of Pledgor's right, title, and interest in the following (the "Pledged Collateral"): the Pledged Shares and the certificates representing the Pledged Shares, and all products and proceeds of any of the Pledged Shares, including, without limitation, all dividends, cash, options, warrants, rights, instruments, subscriptions, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares or any of the foregoing, including without limitation any and all additional shares of, and all securities convertible into and all warrants, options, or other rights to purchase, capital stock of, or other equity interests in, the Issuer from time to time acquired by the Pledgor as a dividend or distribution on or with respect to the Pledged Shares, and the certificates representing such additional shares and equity interests (any such additional shares and equity interests and other items shall constitute part of the Pledged Shares under and as defined in this Agreement). SECTION 2. Security for Obligations. This Agreement secures the prompt ------------------------ and complete payment and performance when due (whether at stated maturity, by acceleration, or otherwise) of all Obligations of the Pledgor to the Holder under the Note and this Agreement (including, without limitation, interest and any other Obligations accruing after the date of any filing by the Pledgor of any petition in bankruptcy or the commencement of any bankruptcy, insolvency, or similar proceeding with respect to the Pledgor). SECTION 3. Delivery of Pledged Collateral. Pledgor hereby agrees that ------------------------------ all certificates or instruments representing or evidencing the Pledged Collateral shall be promptly delivered to and held at all times by the Secured Party pursuant hereto. SECTION 4. Representations and Warranties. The Pledgor hereby ------------------------------ represents and warrants that: (a) The execution, delivery, and performance by the Pledgor of this Agreement are within the Pledgor's powers and do not contravene, or constitute a default under, any provision of applicable law or regulation or of any material agreement, judgment, injunction, order, decree, or other instrument binding upon the Pledgor, or result in the creation or imposition of any lien on any assets of the Pledgor, other than the lien contemplated hereby. (b) To the Pledgor's knowledge, the Pledgor is the legal, record, and beneficial owner of the Pledged Collateral, free and clear of any lien or claims of any Person except for the lien created by this Agreement. (c) This Agreement has been duly executed and delivered by the Pledgor and constitutes a legal, valid, and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms. (d) Upon the delivery to the Secured Party of the Pledged Collateral and the filing of Uniform Commercial Code ("UCC") financing statements, the pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Obligations for the benefit of the Holder. (e) No consent of any other person and no consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by the Pledgor. 2 (f) The pledge of the Pledged Collateral pursuant to this Agreement is not prohibited by any applicable law or governmental regulation, release, interpretation, or opinion of the Board of Governors of the Federal Reserve System or other regulatory agency (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System). SECTION 5. Further Assurance. The Pledgor will, promptly upon request ----------------- by the Secured Party and at the Secured Party's expense, deliver such additional documents as are reasonably necessary to perfect, continue the perfection of, or protect the Secured Party's security interest in, the Pledged Collateral, to protect the Pledged Collateral against the rights, claims, or interests of third persons, to enable the Secured Party to exercise or enforce its rights and remedies hereunder, or otherwise to effect the purposes of this Agreement. The Pledgor also hereby authorizes the Secured Party to file any financing or continuation statements with respect to the Pledged Collateral without the signature of the Pledgor to the extent permitted by applicable law. SECTION 6. Voting Rights; Dividends; Etc. ----------------------------- (a) Subject to paragraph (e) below, the Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof. (b) So long as no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to receive, and to utilize, free and clear of the lien of this Agreement, all cash dividends paid from time to time in respect of the Pledged Shares. (c) Any and all Pledged Collateral in the form of instruments shall in each case be delivered promptly to the Secured Party to hold as Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Secured Party, be segregated from the other property and funds of the Pledgor and be delivered promptly to the Secured Party as Pledged Collateral in the same form as so received (with any necessary endorsements). (d) The Secured Party shall execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and other rights that it is entitled to exercise pursuant to this Agreement. (e) Upon the occurrence and during the continuance of an Event of Default, the Secured Party may deliver a written notice of withdrawal of voting rights specifiying the applicable Event of Default (each, a "Voting Rights Notice") to Pledgor and, upon the Secured Party's delivery of a Voting Rights Notice to Pledgor and during the continuance of the Event of Default specified in such Voting Rights Notice, (i) all rights of the Pledgor to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 6(a) shall cease, and all such rights shall thereupon become vested in the 3 Secured Party, which, to the extent permitted by law, shall thereafter during the continuance of such Event of Default have the sole right to exercise such voting and other consensual rights, and (ii) all cash interest payments and dividends and other distributions payable in respect of the Pledged Collateral shall be paid to the Secured Party as collateral hereunder and the Pledgor's right to receive such cash payments pursuant to Sections 6(b) hereof shall immediately cease during the continuance of such Event of Default. (f) Upon the occurrence and during the continuance of an Event of Default, after the Secured Party has delivered to the Pledgor a valid Voting Rights Notice, the Pledgor shall execute and deliver (or cause to be executed and delivered) to the Secured Party all such proxies, dividend and interest payment orders, and other instruments as the Secured Party may reasonably request for the purpose of enabling the Secured Party to exercise the voting and other rights that it is entitled to exercise pursuant to Section 6(e) above. (g) All payments of interest, principal, or premium and all dividends and other distributions that are received by the Pledgor contrary to the provisions of this Section 6 shall be received in trust for the benefit of the Secured Party, shall be segregated from the other property or funds of the Pledgor, and shall be forthwith delivered to the Secured Party as Pledged Collateral in the same form as so received (with any necessary endorsements). SECTION 7. Power of Attorney. The Pledgor hereby appoints and ----------------- constitutes the Secured Party, effective only upon and during the continuance of an Event of Default, as the Pledgor's attorney-in-fact to exercise all of the following powers upon and during the continuance of an Event of Default: (i) collection of proceeds of any Pledged Collateral; (ii) conveyance of any item of Pledged Collateral to any purchaser thereof; (iii) giving of any notices or recording of any Liens under Section 5 hereof; and (iv) taking any acts under Section 8 hereof. The Secured Party's authority hereunder shall include, without limitation, the authority to endorse and negotiate, for the Secured Party's own account, any checks or instruments constituting Pledged Collateral in the name of the Pledgor, transfer title to any item of Pledged Collateral, sign the Pledgor's name on all financing statements deemed necessary or appropriate to preserve, protect or perfect the security interest in the Pledged Collateral and to file the same, and to take any other actions expressly permitted hereunder to be taken by the Secured Party. This power of attorney is coupled with an interest and is irrevocable by the Pledgor. SECTION 8. Secured Party May Perform. Upon the occurrence of and ------------------------- during the continuation of an Event of Default the Pledgor fails to perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Secured Party incurred in connection therewith shall be Obligations of the Pledgor secured hereunder. SECTION 9. No Assumption of Duties; Reasonable Care. The rights and ---------------------------------------- powers granted to the Secured Party hereunder are being granted to preserve and protect the Secured Party's security interest in and to the Pledged Collateral granted hereby and shall not be 4 interpreted to, and shall not, impose any duties on the Secured Party in connection therewith. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, it being understood that the Secured Party shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. SECTION 10. Subsequent Changes Affecting Collateral. The Pledgor --------------------------------------- represents to the Secured Party that the Pledgor has made its own arrangements for keeping informed of changes or potential changes affecting the Pledged Collateral (including, but not limited to, rights to convert, rights to subscribe, payment of dividends, payments of interest and/or principal, reorganization or other exchanges, tender offers, and voting rights), and the Pledgor agrees that the Secured Party shall have no responsibility or liability for informing the Pledgor of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto. SECTION 11. Remedies Upon Default. If any Event of Default shall have --------------------- occurred and be continuing: (a) The Secured Party shall have, in addition to all other rights given by law or by this Agreement or the Note, all of the rights and remedies with respect to the Pledged Collateral of a secured party under the UCC as in effect in the State of New York at that time. The Secured Party may, without notice and at its option, transfer or register, and the Pledgor shall register or cause to be registered upon request therefor by the Secured Party, the Pledged Collateral or any part thereof on the books of the Issuer into the name of the Secured Party or the Secured Party's nominee(s), with or without any indication that such Pledged Collateral is subject to the security interest hereunder. In addition, with respect to any Pledged Collateral that shall then be in or shall thereafter come into the possession or custody of the Secured Party, the Secured Party may sell or cause the same to be sold at any broker's board or at public or private sale, in one or more sales or lots, at such price or prices as the Secured Party may deem best, for cash or on credit or for future delivery, without assumption of any credit risk. The purchaser of any or all Pledged Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever. The Secured Party shall give Pledgor reasonable notice, but in any event no less than ten (10) days' notice, of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any sale of the Pledged Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies, commercial finance companies, or other financial institutions disposing of property similar to the Pledged Collateral shall be deemed to be commercially reasonable. Any other requirement 5 of notice, demand or advertisement for sale is, to the extent permitted by law, waived. The Secured Party may, in its own name or in the name of a designee or nominee, buy any of the Pledged Collateral at any public sale and, if permitted by applicable law, at any private sale. All expenses (including court costs and reasonable attorneys' fees and disbursements) of, or incident to, the enforcement of any of the provisions hereof shall be recoverable from the proceeds of the sale or other disposition of the Pledged Collateral. (b) In view of the fact that federal and state securities laws may impose certain restrictions on the method by which a sale of the Pledged Collateral may be effected after an Event of Default, Pledgor agrees that during the continuance of an Event of Default, the Secured Party may, from time to time, attempt to sell all or any part of the Pledged Collateral by means of a private placement, restricting the prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, the Secured Party may solicit offers to buy the Pledged Collateral, or any part of it, for cash, from a limited number of investors who might be interested in purchasing the Pledged Collateral. The Pledgor acknowledges and agrees that any such private sale may result in prices and terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Secured Party shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the Issuer to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Issuer agrees to do so. SECTION 12. Irrevocable Authorization and Instruction to the Issuer. ------------------------------------------------------- The Pledgor hereby authorizes and instructs the Issuer to comply with any instruction received by the Issuer from the Secured Party that (i) states that an Event of Default has occurred and (ii) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be fully protected in so complying. SECTION 13. Fees and Expenses. Upon and during the continuance of an ----------------- Event of Default, the amount of any and all reasonable fees and expenses (including, without limitation, the reasonable fees and disbursements of its counsel, of any investment banking firm, business broker or other selling agent and of any other experts and agents reasonably retained by the Secured Party) that the Secured Party may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof shall be Obligations secured hereunder. SECTION 14. Application of Proceeds . Upon the occurrence and during the ----------------------- continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or 6 any part of the Pledged Collateral and any cash held shall be applied by the Secured Party in the following order of priorities: first, to payment of the expenses of such sale or other realization, ----- including reasonable compensation to agents and counsel for the Secured Party, and all expenses, liabilities and advances incurred or made by the Secured Party in connection therewith, and any other unreimbursed fees and expenses for which the Secured Party is to be reimbursed pursuant to Section 13 hereof; second, to the payment of all Obligations of Pledgor under the Note; ------ third, to the payment of all other Obligations, until all Obligations shall ----- have been paid in full; and finally, to the payment to the Pledgor or his successors or assigns, or as ------- a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. SECTION 15. Miscellaneous Provisions. ------------------------ Section 15.1. Notices. All notices, approvals, consents or other ------- communications required or desired to be given hereunder shall be in the form and manner as set forth in Section 13(g) of the Purchase Agreement, and delivered to the addresses set forth in such Section. Section 15.2. Severability. The provisions of this Agreement are ------------ severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. Section 15.3. Limited Recourse. The Secured Party agrees, that, ---------------- except as hereinafter set forth, Secured Party's rights in respect of the Obligations and any claim or liability under the Purchase Agreement, the Note or this Agreement (collectively, the "Note Documents") asserted against Pledgor by the Secured Party shall be limited to satisfaction out of, and enforcement against, the Pledged Collateral. Notwithstanding anything to the contrary contained herein, in any other Note Document or in any other document, certificate or instrument executed or to be executed by Pledgor pursuant hereto or thereto, the Secured Party further acknowledges and agrees that neither Pledgor nor any past, present or future relatives, partners, agents, or representatives of Pledgor (together with Pledgor, collectively, the "Nonrecourse Parties") shall have any liability to the Secured Party (such liability, including such as may arise by operation of law, being expressly waived) for the payment of any sums now or hereafter owing by Pledgor under any of the Note Documents or for the performance of any of the obligations of Pledgor contained herein or therein or shall otherwise be liable or responsible with respect thereto, except as set forth in this Section 15.3. Pledgor acknowledges that the Collateral shall not be subject to 7 the limitations set forth in this Section 15.3. If any Event of Default shall occur and be continuing or if any claim of the Secured Party or the Holder against Pledgor or alleged liability to the Secured Party of Pledgor shall be asserted under any Note Document, Secured Party agrees, for itself and on behalf of the Holder, that, except as hereinafter set forth, the Secured Party shall not have the right to proceed directly or indirectly (except by means of actions against the Collateral) against the Nonrecourse Parties or against their respective properties and assets (other than the Collateral) for the satisfaction of such indebtedness or of any such claim or liability or for any deficiency judgment (except to the extent enforceable against the Collateral) in respect of such indebtedness or any such claim or liability. The foregoing acknowledgments, agreements and waivers shall be enforceable by any Nonrecourse Party. The limitations on recourse set forth in this Section 15.3 shall survive the termination of any and all of the Note Documents and the full payment and performance of all obligations under the Note and under the other Note Documents. Section 15.4. Headings. The headings of the Articles and Sections of -------- this Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. Section 15.5. Counterpart Originals. This Agreement may be signed in --------------------- two or more counterparts. Each signed copy shall be an original, but all of them together represent one and the same agreement. Each counterpart may be executed and delivered by telecopy, if such delivery is promptly followed by the original manually signed copy sent by overnight courier. Section 15.6. Benefits of Agreement. Except as set forth in Section --------------------- 15.3 above, nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 15.7. Amendments; Waivers. Any amendment of this Agreement ------------------- shall be effective only if made in a writing signed by Pledgor and the Secured Party, and neither the Secured Party nor the Holder shall be deemed, by any act, delay, indulgence, omission or otherwise, to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. Failure of the Secured Party to exercise, or delay in exercising, any right, power or privilege hereunder shall not operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Secured Party or the Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Secured Party or the Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. Section 15.8. Interpretation of Agreement. All terms not defined --------------------------- herein or in the Purchase Agreement shall have the meaning set forth in the applicable UCC, except where the 8 context otherwise requires. Acceptance of or acquiescence in a course of performance rendered under this Agreement shall not be relevant to determine the meaning of this Agreement even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. Section 15.9. Continuing Security Interest; Transfer of Notes. This ----------------------------------------------- Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full of all the Obligations, (ii) be binding upon the Pledgor and his successors and assigns, and (iii) inure, together with the rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party and the Holder and their respective permitted successors and assigns. Section 15.10. Waivers. The Pledgor waives presentment and demand for ------- payment of any of the Obligations, protest and notice of dishonor or default with respect to any of the Obligations, and all other notices to which the Pledgor might otherwise be entitled, except as otherwise expressly provided herein or in any other Note Document. Section 15.11. Release; Termination of Agreement. --------------------------------- (a) This Agreement shall terminate upon payment in full and performance of the Obligations owing by the Pledgor to the Secured Party or the Holder. At such time, the Secured Party shall, at the request of the Pledgor, reassign and redeliver to the Pledgor all of the Pledged Collateral hereunder that has not been sold, disposed of, retained or applied by the Secured Party in accordance with the terms hereof. Such reassignment and redelivery shall be without warranty by or recourse to the Secured Party, except as to the absence of any prior assignments by the Secured Party of its interest in the Pledged Collateral. (b) If the Pledgor shall sell any of the Pledged Collateral in accordance with the terms of this Agreement, the Secured Party shall, at the request of the Pledgor, release the Pledged Collateral subject to such sale free and clear of the Lien and security interest under this Agreement. Section 15.12. Final Expression. This Agreement, together with the ---------------- Note and the Purchase Agreement executed in connection herewith, is intended by the parties as a final expression of their Agreement and is intended as a complete and exclusive statement of the terms and conditions thereof. Section 15.13. GOVERNING LAW ------------- THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP 9 ESTABLISHED BETWEEN THE PLEDGOR, THE SECURED PARTY AND THE HOLDER IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. 10 [Pledge Agreement Signature Page] IN WITNESS WHEREOF, the Pledgor and the Secured Party have each caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: __________________________________________ Scott K. Ginsburg SECURED PARTY: ___________________, as Secured Party By:_______________________________________ Name: 11 SCHEDULE I Pledged Shares Number of Pledged Share Certificate Percentage of Issuer ----------------- ----------------- ------------- - ------ Shares Number Outstanding ------ ------ ------------- StarGuide Digital 5,000,000 Class A ___% Networks, Inc. StarGuide Digital 4,005,240 Class B ___% Networks, Inc. 12 EX-17 3 0003.txt WARRANT This Warrant has not been registered under the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws, and may not be sold or transferred unless such sale or transfer is in accordance with the registration requirements of the Act and applicable laws or the Company has received an opinion of counsel reasonably satisfactory to it that an exemption from the registration requirements of the Act and applicable laws is available with respect thereto. STARGUIDE DIGITAL NETWORKS, INC. COMMON STOCK PURCHASE WARRANT Warrant No. __ 2,250,000 Shares of Class B Common Stock 1. Issuance. This Warrant is issued to Scott K. Ginsburg by StarGuide -------- Digital Networks, Inc., a Nevada corporation (hereinafter with its successors called the "Company"), on this ___ day of __________, 2000. 2. Purchase Price, Number of Shares. At any time after the date hereof -------------------------------- but before the expiration hereof, the registered holder of this Warrant (the "Holder"), shall be entitled upon surrender of this Warrant with the subscription form annexed hereto duly executed, at the office of the Company, to purchase up to 2,250,000 shares of Class B Common Stock of the Company, $.001 par value per share (the "Common Stock"), at an exercise price (the "Purchase Price") equal to $2.50 per share. 3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash ------------------------- or by cashier's check; (ii) by the surrender by the Holder to the Company of any promissory notes or other obligations issued by the Company, with all such notes and obligations so surrendered being credited against the Purchase Price in an amount equal to the principal amount thereof plus accrued interest to the date of surrender; (iii) through delivery by the Holder to the Company of other securities issued by the Company, with such securities being credited against the Purchase Price in an amount equal to the fair market value thereof, as determined in good faith by the Board of Directors of the Company; or (iv) by any combination of the foregoing. 4. Partial Exercise. This Warrant may be exercised in part, and the ---------------- Holder shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant, covering the number of shares in respect of which this Warrant shall not have been exercised. 5. Net Issue Exercise. Notwithstanding any provisions herein to the ------------------ contrary, if the fair market value of one share of Common Stock is greater than the Purchase Price for one share of Common Stock (at the date of calculation, as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares of Common Stock equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company, together with the properly endorsed Warrant Certificate, substantially in the form as attached hereto, in which event the Company shall issue to the Holder that number of shares of Common Stock computed using the following formula: WS = WCS (FMV-PP) ----------- FMV WHERE: WS equals the number of Warrant Shares to be issued to the Holder; 1 WCS equals the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation); FMV equals the Fair Market Value (as defined below) of one share of Common Stock (at the date of such calculation); and PP equals the per share Purchase Price (as adjusted to the date of such calculation) of the Warrant. As used in this Section, the term "Fair Market Value" of each Share as of any date shall be determined as follows: (A) if the parties hereto can agree on the Fair Market Value, such agreed upon value shall constitute the Fair Market Value; (B) if the parties cannot reach an agreement as to the Fair Market Value within five business days from the start of negotiations, then such parties shall jointly appoint an appraiser to determine the Fair Market Value. 6. Issuance Date. The person(s) in whose name(s) any certificate ------------- representing shares of Common Stock is issued hereunder shall be deemed to have become the holder of record of the shares represented thereby as at the close of business on the date this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed. 7. Expiration Date; Lock-Up. This Warrant shall expire and be void at the ------------------------ earlier of (i) the close of business on March 1, 2005; (ii) the closing of an offering of shares of the Company's capital stock to the public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933, as amended. If any portion of this Warrant is timely exercised, the shares of Common Stock obtained pursuant to such exercise shall, at the request of the underwriters of such an offering, be subject to a prescribed lock-up period during which the shares of Common Stock will not be offered, sold, pledged, or otherwise directly or indirectly disposed of without the prior written consent of the underwriters. 8. Reserved Shares; Valid Issuance. The Company covenants that it will at ------------------------------- all times from and after the date hereof reserve and keep available such number of its authorized shares of Common Stock, free from all preemptive or similar rights therein, as will be sufficient to permit the exercise of this Warrant in full. The Company further covenants that, assuming the receipt by the Company of the consideration therefor, such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. 9. Dividends. If after the date hereof the Company shall subdivide the --------- Common Stock, by split-up or otherwise, or combine the Common Stock, or issue additional shares of Common Stock in payment of a stock dividend on the Common Stock, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Purchase Price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination. 10. Mergers and Reclassifications. If at any time after the date hereof ----------------------------- there shall be any reclassification, capital reorganization, or change of the Common Stock (other than as a result of a subdivision, combination, or stock dividend provided for in Section 8 hereof), or any consolidation of the Company with, or merger of the Company into, another corporation or other business 2 organization (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the outstanding Common Stock), or any sale or conveyance to another corporation or other business organization of all or substantially all of the assets of the Company, then, as a condition of such reclassification, reorganization, change, consolidation, merger, sale, or conveyance, lawful provisions shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall thereafter have the right to purchase, at a total price not to exceed that payable upon the exercise of this Warrant in full, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation, merger, sale, or conveyance by a holder of the number of shares of Common Stock which might have been purchased by the Holder immediately prior to such reclassification, reorganization, change, consolidation, merger, sale, or conveyance, and in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Purchase Price and the number of shares issuable hereunder) shall thereafter be applicable in relation to any shares of stock or other securities and property thereafter deliverable upon exercise hereof. 11. Fractional Shares; Certificate of Adjustment. In no event shall any -------------------------------------------- fractional share of Common Stock be issued upon any exercise of this Warrant. Whenever the Purchase Price is adjusted, as herein provided, the Company shall promptly deliver to the Holder a certificate of its Chief Financial Officer setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. 12. Notices of Certain Record Dates. In the event of (i) any taking by the ------------------------------- Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase, or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; (ii) any reclassification of the capital stock of the Company, capital reorganization of the Company, consolidation or merger involving the Company, or sale or conveyance of all or substantially all of its assets; or (iii) any voluntary or involuntary dissolution, liquidation, or winding-up of the Company; then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (a) the date on which any such record is to be taken for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; or (b) the date on which any such reclassification, reorganization, consolidation, merger, sale, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record in respect of such event are to be determined. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any such action is to be taken. 13. Piggyback Registration. The provisions of this Section 13 shall apply ---------------------- with respect to both this Warrant and shares issued upon exercise to this Warrant (the "Registrable Securities"). (a) Notice of Piggyback Registration. Subject to the exceptions and -------------------------------- limitations contained herein, if, at any time or from time-to-time, the Company shall Register any of its securities, either for its own account or for the account of a security holder or holders (other than a Registration relating solely to a transaction described in Rule 145 under the Securities Act, a Registration on Form S-8, or an initial public offering) the Company will: (i) promptly give the Holder written notice thereof (which notice shall include a list of jurisdictions in which the Company intends to attempt to qualify such securities under applicable Blue Sky or other state securities laws), and (ii) include in such Registration (and any related registration and/or qualification under the applicable Blue Sky or other state securities laws), and in any Underwritten 3 Offering pursuant to such Registration, all Registrable Securities specified in a written request or requests delivered to the Company by the Holder within twenty (20) days after receipt of such written notice from the Company by the Holder. (b) Piggyback Registration in Underwritten Offerings. ------------------------------------------------ (i) Notice of Underwritten Offering. If the Registration of which the Company gives notice is for an Underwritten Offering commenced at the election of the Company, the Company shall so advise the Holder as part of the written notice given pursuant to Section 13(a). In such event, the right of the Holder to Registration shall be conditioned upon there being an Underwritten Offering, and the inclusion of the Holder's Registrable Securities in such Registration and Underwritten Offering to the extent provided in and in compliance with this Section 13. If Holder proposes to distribute its securities through such Underwritten Offering, Holder shall (together with the Company and any other holders distributing securities through such underwriting) enter into an underwriting agreement containing the terms and conditions agreed to by the Company. Possession of this Warrant alone shall give the Holder no right to participate in the selection of underwriters for an offering pursuant to this Section 13(b). (ii) Marketing Limitation in Piggyback Registration. In the event the representative of the underwriters in any Underwritten Offering advises the Company in writing that market factors (including, without limitation, the aggregate number of shares of Common requested to be Registered, the general condition of the market, and the status of the persons proposing to sell securities in the Underwritten Offering) require a limitation of the shares to be offered and sold in the Underwritten Offering, then the number of shares to be excluded from the Underwritten Offering shall be determined in the following order: (i) first, securities held by persons who are not contractually entitled to be included in the Registration; and (ii) second, securities (other than preferred stock of the Company or securities convertible therefrom) that are contractually entitled to be included in the Registration, including securities Registrable pursuant to this Section 13; and (iii) third, securities represented by preferred stock of the Company, if any, or shares convertible therefrom, that are entitled to be included in the Registration. Any partial reduction in the number of shares or securities included in the Underwritten Offering affecting any of the three (3) classes set forth in the immediately preceding sentence shall be allocated among the persons in any such class pro rata, as nearly as practicable, based on the number of Registrable Securities held by each persons and included in the Registration as a percentage of the aggregate Registrable Securities held by all persons and included in the Registration. (iii) Withdrawal in Piggyback Registration. If the Holder exercises piggyback registration rights pursuant to this Section 13 and shall disapprove of the proposed terms of any Underwritten Offering, he may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least five business days prior to the effective date of the Registration Statement. Any Registrable Securities or other securities excluded or withdrawn from such Underwritten Offering shall be withdrawn from such Registration. (c) Blue Sky in Piggyback Registration. In the event of any Registration ---------------------------------- of Registrable Securities pursuant to this Section 13, the Company will use its best efforts to register and/or qualify the securities covered by the Registration Statement under the securities or Blue Sky laws of such jurisdiction as shall be reasonably appropriate for the distribution of the Registrable Securities. (d) Right to Terminate Registration. The Company shall have the right to ------------------------------- terminate or withdraw any Registration initiated by it that triggers piggyback registration rights pursuant to this Section 13 prior to the effectiveness of such Registration, whether or not the Holder has elected to include securities in such registration. 4 14. Warrant Register. The Company will maintain a register containing the ---------------- names and addresses of the registered holders of warrants issued by the Company. The Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be given by certified mail or delivered to the Holder at its address as shown on the warrant register. 15. Substitute Warrants. If this Warrant is mutilated, lost, stolen, or ------------------- destroyed, the Company shall issue a new warrant of like tenor and denomination and deliver the same (i) in exchange and substitution for and upon surrender and cancellation of the mutilated Warrant; or (ii) in lieu of any Warrant lost, stolen, or destroyed, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction) and of indemnity reasonably satisfactory to the Company. 16. No Impairment. The Company will not, by amendment of its Articles of ------------- Incorporation or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder. 17. Miscellaneous. The provisions and terms of this Warrant (i) shall be ------------- governed by and construed in accordance with the internal laws of the State of Nevada; (ii) shall be binding upon the Company's successors and assigns and shall inure to the benefit of the Holder's successors, legal representatives, and permitted assigns; (iii) subject to the terms hereof, may be amended, modified, or waived only with the written consent of the Company and the Holder; (iv) shall, if any terms hereof are found unenforceable by a legally empowered court or agency, be deemed modified to the extent necessary to become enforceable; and (v) constitute the entire agreement of the parties with respect to the transactions contemplated herein. IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its duly authorized officer, under seal, as of the date above written. STARGUIDE DIGITAL NETWORKS, INC. By: ______________________________ Name: Title: ATTEST: ______________________________ Name: Title: 5 FORM OF SUBSCRIPTION To: STARGUIDE DIGITAL NETWORKS, INC. Date: _______________ The undersigned hereby subscribes for _______________ shares of Common Stock covered by this Warrant. The certificates for such shares shall be issued in the name of the undersigned or as otherwise indicated below: ______________________________ Signature ______________________________ Name for Registration ______________________________ Mailing Address ______________________________ * * * FORM OF ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto ____________________________________________ the Warrant attached hereto and does hereby irrevocably constitute and appoint ____________________________________________ its attorney to transfer the Warrant on the books of Starguide Digital Networks, Inc. with full power of substitution on the premises. ______________________________ Signature ______________________________ Date ______________________________ Witness 6 EX-18 4 0004.txt STOCK OPTION AGREEMENT Exhibit 18 StarGuide Digital Networks, Inc. 1996 Equity Incentive Plan Stock Option Agreement Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Agreement. I. NOTICE OF STOCK OPTION GRANT ---------------------------- Scott Ginsburg You ("Optionee") have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Stock Option Agreement. The terms of your grant are set forth below: Date of Grant: November 29, 1999 Vesting Commencement Date: November 29, 1999 Exercise Price per Share: $3.75 per share Total Number of Shares Granted: 250,000 Total Exercise Price: $937,500 Type of Option: X Incentive Stock Option ---- ---- Non-Qualified Stock Option Term/Expiration Date: November 29, 2009 Exercise and Vesting Schedule: - ----------------------------- The Shares subject to this Option shall vest according to the following schedule: Fifty percent of the Shares subject to the Option (rounded down to the next ----- whole number of shares) shall vest on November 29, 2000, and the remaining ----------------- Fifty percent of the Shares subject to the Option shall vest on November 29, - ----- ------------ 2001; provided, however, that this Option shall be 100% vested and fully - ---- exercisable upon the Company's issuance of a press release announcing an initial public offering. Termination Period: - ------------------- This Option may be exercised, to the extent vested, for ninety (90) days after Optionee ceases to be a Service Provider, or such longer period as may be applicable upon the death or disability of Optionee, as provided herein (or, if not provided herein, then as provided in the Plan), but in no event later than the Term/Expiration Date as provided above. II. AGREEMENT --------- 1. Grant of Option. The Company hereby grants to the Optionee an Option to --------------- purchase the Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price"). Notwithstanding anything to the contrary anywhere else in this Option Agreement, this grant of an Option is subject to the terms, definitions and provisions of the StarGuide Digital Networks, Inc. 1999 Equity Incentive Plan (the "Plan") adopted by the Company, which is incorporated herein by reference. If designated in the Notice of Grant as an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code; provided, however, that to the extent that the aggregate Fair Market Value of stock with respect to which Incentive Stock Options (within the meaning of Code Section 422, but without regard to Code Section 422(d)), including the Option, are exercisable for the first time by the Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company or any Subsidiary) exceeds $100,000, such options shall be treated as not qualifying under Code Section 422, but rather shall be treated as Non-Qualified Stock Options to the extent required by Code Section 422. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted. For purposes of these rules, the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. 2. Exercise of Option. This Option is exercisable as follows: ------------------ (a) Right to Exercise. ----------------- (i) This Option shall be exercisable cumulatively according to the vesting schedule set out in the Notice of Grant. Except as otherwise provided by Section 8 or 9, Shares subject to this Option shall vest based on Optionee's continued status as a Service Provider. (ii) This Option may not be exercised for a fraction of a Share. (iii) In the event of Optionee's death, disability, or other termination of the Optionee's status as a Service Provider, the exercisability of the Option is governed by Sections 7, 8 and 9 below. (iv) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in the Notice of Grant. (b) Method of Exercise. This Option shall be exercisable by written ------------------ Notice (in the form attached as Exhibit A). The Notice must state the number of --------- Shares for which the Option is being exercised, and such other representations and agreements with respect to such shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan. The Notice must be signed by the Optionee and shall be delivered in person or by certified 2 mail to the Secretary of the Company. The Notice must be accompanied by payment of the Exercise Price, including payment of any applicable withholding tax. This Option shall be deemed to be exercised upon receipt by the Company of such written Notice accompanied by the Exercise Price and payment of any applicable withholding tax. No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 3. Optionee's Representations. If the Shares purchasable pursuant to the -------------------------- exercise of this Option have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B. --------- 4. Lock-Up Period. Optionee hereby agrees that if so requested by the -------------- Company or any representative of the underwriters (the "Managing Underwriter") in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such longer period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the "Market Standoff Period") following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. 5. Method of Payment. Payment of the Exercise Price shall be by any of ----------------- the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; (c) with the consent of the Administrator, a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Administrator; (d) with the consent of the Administrator, surrender of other shares of Common Stock of the Company which (A) in the case of Shares acquired from the Company, have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being exercised; 3 (e) with the consent of the Administrator, surrendered Shares issuable upon the exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Option or exercised portion thereof; (f) with the consent of the Administrator, property of any kind which constitutes good and valuable consideration; or (g) with the consent of the Administrator, delivery of a notice that the Optionee has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate Exercise Price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale. 6. Restrictions on Exercise. This Option may not be exercised until the ------------------------ Plan has been approved by the stockholders of the Company. If the issuance of Shares upon such exercise or if the method of payment for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, then the Option may also not be exercised. The Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation before allowing the Option to be exercised. 7. Termination of Relationship. If Optionee ceases to be a Service --------------------------- Provider (other than by reason of the Optionee's death or the total and permanent disability of the Optionee as defined in Code Section 22(e)(3)), Optionee may exercise this Option at any time during the Termination Period as set forth in the Notice of Grant, to the extent the Option was vested at the date of such termination. To the extent that Optionee was not vested in this Option at the date on which Optionee ceases to be a Service Provider, or if Optionee does not exercise this Option within the time specified herein, the Option shall terminate. 8. Disability of Optionee. If Optionee ceases to be a Service Provider ---------------------- as a result of his or her total and permanent disability as defined in Code Section 22(e)(3), the Option shall become fully vested and exercisable with respect to all Shares covered thereby and Optionee may exercise the Option at any time within twelve (12) months following the date of his or her termination of employment (but in no event later than the expiration date of the term of this Option as set forth in the Notice of Grant). To the extent Optionee does not exercise the Option within the time specified herein, the Option shall terminate. 9. Death of Optionee. If Optionee ceases to be a Service Provider as a ----------------- result of the death of Optionee, the Option shall become fully vested and exercisable with respect to all Shares covered thereby and the Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of this Option as set forth in the Notice of Grant) by Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance. To the extent that the Option is not exercised within the time specified herein, the Option shall terminate. 10. Non-Transferability of Option. This Option may not be transferred ----------------------------- in any manner except by will or by the laws of descent or distribution. It may be exercised during the lifetime 4 of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 11. Term of Option. This Option may be exercised only within the term -------------- set out in the Notice of Grant. 12. Tax Consequences. Set forth below is a brief summary as of the ---------------- date of this Option of some of the federal income tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (a) Exercise of Incentive Stock Option. If this Option qualifies ---------------------------------- as an Incentive Stock Option, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise. (b) Exercise of Incentive Stock Option Following Disability. If ------------------------------------------------------- the Optionee ceases to be a Service Provider as a result of disability that is not total and permanent disability as defined in Code Section 22(e)(3), to the extent permitted on the date on which Optionee ceases to be a Service Provider, the Optionee must exercise an Incentive Stock Option within ninety (90) days of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option. (c) Exercise of Non-Qualified Stock Option. There may be a regular -------------------------------------- federal income tax liability upon the exercise of a Non-Qualified Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Optionee is an employee of the Company, the Company will be required to withhold from Optionee's compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise. If the Optionee is subject to Section 16 of the Exchange Act, the date of income recognition may be deferred for up to six (6) months. (d) Disposition of Shares. In the case of a Non-Qualified Stock --------------------- Option, if Shares are held for the minimum long-term capital gain holding period in effect at the time of disposition, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an Incentive Stock Option, if Shares transferred pursuant to the Option are held for the minimum long- term capital gain holding period in effect at the time of disposition (and provided such holding period comprises at least one year after exercise of the Option) and are disposed of at least two (2) years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal income tax purposes. If Shares purchased under an Incentive Stock Option are disposed of after such one- year period following exercise, but before the expiration of the 5 minimum long-term capital gain holding period in effect at the time of disposition, then gain realized on such disposition may be taxed as a short-term capital gain, which may or may not be equivalent to taxation as compensation income (taxable at ordinary income rates). If Shares purchased under an Incentive Stock Option are disposed of within such one-year period or within two (2) years after the Date of Grant, any gain realized on such disposition will be treated as compensation income to the extent of the difference between the Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the sale price of the Shares. (e) Notice of Disqualifying Disposition of Incentive Stock Option ------------------------------------------------------------- Shares. If the Option granted to Optionee herein is an Incentive Stock Option, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or before the later of (1) the date which is two (2) years after the Date of Grant, or (2) the date which is one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. [Signature page follows] 6 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one document. STARGUIDE DIGITAL NETWORKS, INC. By:________________________________ Name:______________________________ Title:_______________________________ OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 2000 EQUITY INCENTIVE PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE. Optionee acknowledges receipt of a copy of the Plan and represents that he is familiar with the terms and provisions thereof. Optionee hereby accepts this Option subject to all of the terms and provisions hereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below. Dated: __________________ _______________________________ [OPTIONEE] Residence Address: _______________________________ _______________________________ 7 -----END PRIVACY-ENHANCED MESSAGE-----