<PAGE>
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. 1)
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
December 17, 1999
-----------------
(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 [ ].
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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 1,326,418 1/
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
2,920,134 2/
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 1,326,418 1/
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,920,134 2/
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,246,552 1/2/
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
1/ Does not include an additional 120,867 shares of Common Stock that are
subject to warrants issued to Scott K. Ginsburg. The warrants are not
exercisable prior to December 17, 2000. See Item 5.
2/ 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.
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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 2/3/
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,920,134 2/3/
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,920,134 3/
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.6%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ------------------------------------------------------------------------------
3/ Does not include an additional 3,008,527 shares of Common Stock which are
subject to warrants issued to Moon Doggie Family Partnership. The warrants are
not currently exercisable, because their exercisability is subject to certain
conditions based on the trading prices of the underlying Common Stock. These
conditions have not been satisfied to date. See Item 5.
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CUSIP No. 253921100 Page 4 of 9 Pages
ITEM 1. SECURITY AND ISSUER.
This Amendment No. 1 to Schedule 13D relates to the Common Stock, no
par value par 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:
<TABLE>
<S> <C>
(1) Scott K. Ginsburg: (i) Investor;
(ii) Chairman of the Board of Directors
of the Issuer;
(iii) Chairman of the Board of Directors
and Chief Executive Officer 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"):
</TABLE>
(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 individually purchased an additional 241,733 shares of
Common Stock of the Issuer at a price of $5.171 per share, and warrants to
purchase 120,867 shares of Common Stock of the Issuer at a price of $.001 per
warrant, pursuant to a Common Stock and Warrant Purchase Agreement dated as of
December 17, 1999 by and among the Issuer, Mr. Ginsburg, and certain other
purchasers (the "Common Stock and Warrant Purchase Agreement"), for an aggregate
purchase price of approximately $1,250,000. Mr. Ginsburg purchased all shares of
Common Stock of the Issuer with personal funds.
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
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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 Digital Networks, Inc. ("StarGuide"), a privately held company
that, through an affiliated partnership, is engaged in businesses that may be
complementary to business conducted or proposed to be conducted by the Issuer.
Mr. Ginsburg may in the future pursue transactions that could result in
combining all or certain operations of the Issuer, on the one hand, and
StarGuide and its affiliated partnership, on the other hand.
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.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Scott K. Ginsburg: 4,246,552 shares of Common Stock representing
approximately 15.5% of the outstanding Common Stock. This amount does not
include 120,867 shares of Common Stock of the Issuer that are subject to
warrants issued to Mr. Ginsburg, which warrants are not exercisable prior to
December 17, 2000. See Item 6. It also does not include 3,008,527 shares of
Common Stock which are subject to warrants issued to Moon Doggie, which warrants
are not currently exercisable, because their exercisability is subject to
certain conditions based on the trading prices of the underlying Common Stock.
These conditions have not been satisfied to date. This amount does include
2,920,134 shares of Common Stock held of record by Moon Doggie, of which Mr.
Ginsburg is the sole general partner. Mr. Ginsburg, in his capacity as sole
general partner, holds voting and dispositive power over these shares. By virtue
of Mr. Ginsburg's control of Moon Doggie, Mr. Ginsburg may be deemed to have
beneficial ownership of the shares held of record by Moon Doggie.
Moon Doggie: 2,920,134 shares of Common Stock of the Issuer
representing approximately 10.6% of the outstanding Common Stock. This amount
does not include 3,008,527 shares of Common Stock which are subject to warrants
issued to Moon Doggie, which warrants are not currently exercisable, because
their exercisability
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CUSIP No. 253921100 Page 6 of 9 Pages
is subject to certain conditions based on the trading prices of the underlying
Common Stock. These conditions have not been satisfied to date. See Item 6.
(b) Scott K. Ginsburg has sole voting and dispositive power over
1,326,418 shares of Common Stock, representing approximately 4.8% of the
outstanding Common Stock. Mr. Ginsburg, as sole general partner of Moon Doggie,
has voting and dispositive power over 2,920,134 shares of Common Stock,
representing approximately 10.6% of the outstanding Common Stock. Mr. Ginsburg
may be deemed to have beneficial ownership of the shares held of record by Moon
Doggie. See response to Item 5(a) above for additional information.
Moon Doggie has voting and dispositive power over 2,920,134 shares of
Common Stock, representing approximately 10.6% of the outstanding Common Stock.
Because Mr. Ginsburg is the sole general partner of Moon Doggie and, as such,
controls Moon Doggie, Moon Doggie may be deemed to share such voting and
dispositive power over these shares of Common Stock with Mr. Ginsburg. See
response to Item 5(a) for additional information.
(c) On December 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 and
Warrant Purchase Agreement.
(d) No person other than Mr. Ginsburg or Moon Doggie has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of Common Stock of the Issuer owned by Mr. Ginsburg
or Moon Doggie.
(e) [Not applicable.]
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
(a) On August 12, 1998, the Issuer and Mr. Ginsburg entered into the
First Common Stock Subscription Agreement for the purchase of 714,285 shares of
Common Stock at a purchase price of $2.80 per share. In connection with such
purchase, the Issuer granted Mr. Ginsburg certain registration rights with
respect to the purchased shares. The foregoing summary of such agreement is
qualified in its entirety by reference to Exhibit 1 which is hereby incorporated
by reference.
(b) On September 25, 1998, the Issuer and Mr. Ginsburg entered into
the Second Common Stock Subscription Agreement for the purchase of shares of
Common Stock with an aggregate purchase price not to exceed $8 million, nor to
be less than $6 million. This agreement was amended by that certain letter
agreement dated December 9, 1998 by and between the Issuer and Moon Doggie. In
connection with such purchase, the Issuer has granted to Moon Doggie certain
demand registration rights which may not be exercised for a period of sixty days
following Moon Doggie's purchase of such shares. The foregoing summary of such
agreement is qualified in its entirety by reference to Exhibit 2 and Exhibit 3,
each of which is hereby incorporated by reference.
(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 and is currently exercisable
with respect to 50% of the shares, in whole or in part with respect to such
shares, during the term commencing on the date that the closing price of the
Common Stock of the Issuer on the Nasdaq National Market has exceed $10.00 per
share for at least twenty (20) of the preceding thirty (30) consecutive trading
days and ending at 5:00 p.m. on December 9, 2001. The remaining shares shall be
exercisable, in whole or in part, during the term commencing on the date that
the closing price of the Common Stock of the Issuer on the Nasdaq national
Market has exceeded $15.00 per share for at least twenty (20) of the preceding
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CUSIP No. 253921100 Page 7 of Pages
---
thirty (30) consecutive trading days and ending at 5:00 p.m. on December 9,
2001. The Second Warrant is void after December 9, 2003 and is currently
exercisable only with respect to that portion of the shares that have vested.
Shares shall vest in equal monthly installments upon Mr. Ginsburg's completion
of each of the twenty-four (24) months of continuous service measured from and
after the date of issuance of the Second Warrant. The Second Warrant shall be
exercisable for up to 50% of the vested shares, in whole or in part with respect
to such vested shares, during the term commencing on the date that the closing
price of the Common Stock of the Issuer on the Nasdaq National Market has
exceeded $10.00 per share for at least twenty (20) of the preceding thirty (30)
consecutive trading days and ending at 5:00 p.m. on December 9, 2003. The
remaining vested shares shall become exercisable in whole or in part, during the
term commencing on the date that the closing price of the Common Stock of the
Issuer on the Nasdaq National Market has exceeded $15.00 per share for at least
twenty (20) of the preceding thirty (30) consecutive trading days and ending at
5:00 p.m. on December 9, 2003. The foregoing summary of such agreements is
qualified in its entirety by such references to Exhibit 4, Exhibit 5 and Exhibit
6, each of which is hereby incorporated by reference.
(d) On December 17, 1999, the Issuer, Mr. Ginsburg, and certain
other investors entered into the Common Stock and Warrant 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, and warrants to purchase
shares of Common Stock, at a purchase price of $.001 per warrant. The foregoing
summary of such agreement is qualified in its entirety by reference to Exhibit
9, which is hereby incorporated by reference.
(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 and Warrant Purchase Agreement. The
foregoing summary of such agreement is qualifed in its entirety by reference to
Exhibit 10, which is hereby incorporated by reference.
(f) Pursuant to the Common Stock and Warrant Purchase Agreement,
the Issuer has issued to Mr. Ginsburg a warrant to purchase up to 120,867 shares
of Common Stock (the "Warrant"). The Warrant is void after December 17, 2002,
and is not exercisable prior to December 17, 2000 and, thereafter, is
exercisable with respect to 50% of the shares, in whole or in part with respect
to such shares, during the term commencing on the date that the closing price of
Common Stock of the Issuer on the Nasdaq National Market has exceeded $10.00 per
share for at least twenty (20) of the preceding thirty (30) consecutive trading
days and ending at 5:00 p.m. on December 17, 2002. The remaining shares shall be
exercisable, in whole or in part, during the term commencing on the date that
the closing price of the Common Stock of the Issuer on the Nasdaq national
Market has exceeded $15.00 per share for at least twenty (20) of the preceding
thirty (30) consecutive trading days and ending at 5:00 p.m. on December 17,
2002. The foreging summary of this agreement is qualified in its entirety by
such references to Exhibit 11, which is hereby incorporated by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 9 Common Stock and Warrant Purchase Agreement dated December 17,
1999 by and between Digital Generation Systems, Inc. and Scott K.
Ginsburg.
Exhibit 10 Registration Rights Agreement dated December 17, 1999 by and
between Digital Generation Systems, Inc. and Scott K. Ginsburg.
Exhibit 11 Warrant to Purchase Common Stock dated December 17, 1999 by and
between Digital Generation Systems, Inc. and Scott K. Ginsburg.
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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: December 20, 1999
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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: December 20, 1999
<PAGE>
EXHIBIT 9
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
December 17, 1999
<PAGE>
DIGITAL GENERATION SYSTEMS, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is made as of the
17/th/ day of December, 1999, by and among Digital Generation Systems, Inc., a
California corporation (the "Company"), and the investors, severally and not
jointly, listed on Schedule A hereto, each of which is herein referred to as an
"Investor."
WHEREAS, the Company desires to sell, and the Investors desire to
purchase, shares of the Company's Common Stock (the "Common Shares") with an
aggregate purchase price of three million seven hundred fifty thousand four
dollars and four cents ($3,750,004.04) and at a price per share equal to five
dollars and seventeen and one-tenth cents ($5.171) (the "Purchase Price"); and
WHEREAS, the Company desires to sell, and the Investors desire to
purchase for an aggregate purchase price of three hundred sixty-two dollars and
fifty-nine cents ($362.59), warrants, in the form attached hereto as Exhibit A
---------
(the "Warrants"), to purchase shares of the Company's Common Stock in an amount
equal to fifty percent (50%) of the number of Common Shares purchased by each
Investor pursuant to this Agreement (the "Warrant Shares") and with an exercise
price equal to the Purchase Price of the Common Shares.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the Common Shares and the Warrants.
--------------------------------------------------------
1.1 Sale and Issuance of the Common Shares and the Warrants.
--------------------------------------------------------
(a) On or prior to the Closing (as defined below), the Company shall
have authorized (i) the sale and issuance to the Investors of the Common Shares,
(ii) the sale and issuance to the Investors of the Warrants and (iii) the
issuance of the Warrant Shares to be issued upon exercise of the Warrants.
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing, and the
Company agrees to sell and issue to each Investor at the Closing, that number of
Common Shares set forth opposite such Investor's name on Schedule A hereto for
the purchase price set forth opposite such Investor's name on Schedule A hereto.
(c) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing, and the
Company agrees to sell and issue to each Investor at the Closing, a Warrant to
purchase that number of shares of the Company's Common Stock equal to fifty
percent (50%) of the number of Common Shares purchased by such Investor, for the
purchase price set forth opposite such Investor's name on Schedule A hereto.
The Company and each Investor agrees, severally and not jointly, that as of the
date hereof the purchase price of the Warrants is equal to the fair market value
of such warrants.
1.2 Closing. The purchase and sale of the Common Shares and the
-------
Warrants shall take place at the offices of the Company at 10:00 A.M., on
December 17, 1999, or at such other time and place as the Company and Investors
acquiring in the aggregate more than half of the Common
<PAGE>
Shares and the Common Stock issuable or issued upon exercise of the Warrants
mutually agree upon orally or in writing (which time and place are designated as
the "Closing"). At the Closing (or as soon thereafter as is practicable) the
Company shall deliver to each Investor (a) a certificate representing the Common
Shares that such Investor is purchasing and (b) a Warrant to purchase that
number of shares of the Company's Common Stock as set forth in Section 1.1(c)
above, against payment of the purchase price therefor by check or wire transfer.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Investor that:
2.1 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
the performance of all obligations of the Company hereunder and thereunder, and
the authorization, issuance (or reservation for issuance), sale and delivery of
the Common Shares and the Warrants being sold hereunder and the Warrant Shares
issuable upon conversion of the Warrants has been taken or will be taken prior
to the Closing, and this Agreement and the Registration Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Registration Rights Agreement may be limited by
applicable federal or state securities laws.
2.2 Valid Issuance of Common Shares and Warrants. The Common Shares
--------------------------------------------
and the Warrants that are being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration Rights
Agreement and under applicable state and federal securities laws. The Warrant
Shares issuable upon conversion of the Warrants purchased under this Agreement
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Company's Amended and Restated Articles of
Incorporation, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Registration Rights Agreement and under applicable
state and federal securities laws.
2.3 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Common Shares and the Warrants as contemplated by this
Agreement are exempt from the registration requirements of any applicable state
and federal securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
2.4 Additional Information. The Company has filed in a timely manner
----------------------
all documents that the Company was required to file under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), during the twelve (12)
months preceding the date of this Agreement (the "SEC Filings"). The SEC
Filings complied in all material respects with the requirements of the
2
<PAGE>
Exchange Act or the Securities Act of 1933, as amended (the "Act"), as the case
may be, as of their respective filing or effective dates, and the information
contained therein was true and correct in all material respects as of the date
or effective date of such documents, and each of the SEC Filings, as of such
date, did not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3. Representations and Warranties of the Investors. Each Investor hereby
-----------------------------------------------
represents and warrants that:
3.1 Authorization. Such Investor has full power and authority to
-------------
enter into this Agreement and the Registration Rights Agreement, and each such
Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Common Shares and the Warrant to be received by such Investor
and the Warrant Shares issuable upon exercise of the Warrant to be received by
such Investor (collectively, the "Securities") will be acquired for investment
for such Investor's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Common Shares and the Warrant. Such Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Common Shares and the Warrant and the business, properties, prospects and
financial condition of the Company.
3.4 Investment Experience. Such Investor is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Common
Shares and the Warrant. If other than an individual, Investor also represents
it has not been organized for the purpose of acquiring the Common Shares and the
Warrant.
3.5 Accredited Investor. Such Investor is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3
<PAGE>
3.6 Restricted Securities. Such Investor understands that the
---------------------
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Registration Rights Agreement provided and to the extent
this Section 3 and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under the
Act, covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to SEC Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of Paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
(c) Any legend required by applicable blue sky law.
4
<PAGE>
4. Conditions of Investors' Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under Section 1 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against any Investor who does not consent thereto:
4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
4.4 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.5 Registration Rights Agreement. The Company and each Investor
-----------------------------
shall have entered into the Registration Rights Agreement.
4.6 Minimum Funding. The Investors shall collectively deliver to the
---------------
Company the aggregate Purchase Price.
4.7 Lock-Up. The Directors of the Company who are not parties hereto
-------
shall have executed and delivered to the Company letters to the effect that they
shall be bound by restrictions substantially similar to the restrictions set
forth in Section 6.1 hereof.
5. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.1.
5.3 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in
5
<PAGE>
connection with the lawful issuance and sale of the Securities pursuant to this
Agreement shall be duly obtained and effective as of the Closing.
6. Miscellaneous.
-------------
6.1 Lock-Up. Each Investor agrees, severally and not jointly, that
-------
without the prior written consent of the Board of Directors, the Investor will
not, directly or indirectly, sell, offer to sell, contract to sell, solicit an
offer to buy, grant any option for the purchase or sale of, assign, pledge,
distribute or otherwise transfer, dispose of or encumber any shares of the
Company's Common Stock, or any options, rights, warrants or other securities
convertible into or exercisable or exchangeable for the Company's Common Stock
or evidencing any right to purchase or subscribe for shares of the Company's
Common Stock, whether or not beneficially owned by the undersigned, for a period
of 180 days after the Closing. Each Investor agrees to cause its Affiliates (as
defined under the Securities Act of 1933) to comply with the foregoing
restrictions.
In furtherance of the foregoing, the Company and ChaseMellon
Shareholder Services, L.L.C., as Transfer Agent for the Company's Common Stock,
are hereby authorized to decline to make any transfer of securities if such
transfer would constitute a violation or breach of the provisions hereof. Each
Investor hereby consents to the placing of a stop-transfer order with the
Transfer Agent for such 180-day period with respect to any of the shares of the
Company's Common Stock registered in the name of such Investor or his Affiliates
or beneficially owned by such Investor or his affiliates.
6.2 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
6.3 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.4 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.6 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.7 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal
6
<PAGE>
delivery to the party to be notified, deposit with a nationally recognized
overnight courier, confirmed facsimile or upon deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address or addresses indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
6.8 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.9 Expenses. Irrespective of whether the Closing is effected, each
--------
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Warrants or the Registration Rights Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
6.10 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of (a) the Company and (b) the
holders of two-thirds (2/3) of the Common Shares and the Common Stock issuable
or issued upon exercise of the Warrants. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
6.11 Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
6.12 Corporate Securities Law. THE SALE OF THE SECURITIES THAT
------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7
<PAGE>
6.13 Entire Agreement. This Agreement and the documents referred
----------------
to herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DIGITAL GENERATION SYSTEMS, INC.
By: /s/ Matthew E. Devine
--------------------------------------
Matthew E. Devine
Chief Executive Officer
Address: 875 Battery Street
San Francisco, CA 94111
<PAGE>
/s/ Scott K. Ginsburg
----------------------------------------------
Scott K. Ginsburg
Address: 5221 North O'Connor Boulevard
Suite 950
Irving, Texas 75039
<PAGE>
EXHIBIT A
---------
Form of Warrant
<PAGE>
EXHIBIT B
---------
Registration Rights Agreement
<PAGE>
EXHIBIT 10
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 17th day of December,
1999, by and between Digital Generation Systems, Inc., a California corporation
(the "Company"), and each of the persons listed on Schedule A hereto
(collectively, the "Holders").
RECITALS
--------
WHEREAS, the Company issued 725,199 shares of its Common Stock (the "Common
Shares") and warrants (the "Warrants") to purchase up to an additional 362,602
shares of its Common Stock (the "Warrant Shares") to certain of the Holders in a
private placement transaction pursuant to that certain Common Stock and Warrant
Purchase Agreement dated December 17, 1999 (the "Purchase Agreement"); and
WHEREAS, in order to induce the Holders to invest funds in the Company and
to enter into the Purchase Agreement, the Company and the Holders agreed to
enter into this Agreement and hereby agree that this Agreement shall govern the
rights of the Holders to cause the Company to register the Common Shares and the
Warrant Shares and certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(c) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(d) The term "Registrable Securities" means the Common Shares and
the Warrant Shares issued or issuable upon exercise of the Warrants and any
Common Stock of the Company issued as a dividend or other distribution with
respect to the Common Shares or the Warrant Shares.
(e) The term "Rule 144" shall mean Rule 144 promulgated under the
Act, as amended, or any similar successor rule thereto that may be promulgated
by the SEC.
(f) The term "SEC" shall mean the Securities and Exchange
Commission.
<PAGE>
1.2 Initial S-3 Registration.
------------------------
(a) The Company shall use diligent efforts to prepare and file,
on or before December 31, 2000, a registration statement on Form S-3 and any
related qualification or compliance with respect to all of the Common Shares
owned by the Holders so as to permit or facilitate the sale and distribution of
the Holders' Common Shares.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 1.2:
(i) if Form S-3 is not available for such offering by the
Holders;
(ii) if the Company shall furnish to the Holders a
certificate signed by the chief executive officer or the president of the
Company stating that in the good faith judgment of the board of directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than sixty (60) days after such date,
provided that such right to defer filing shall be exercised by the Company not
more than once in any twelve (12) month period; or
(iii) in any jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act.
(c) Subject to the foregoing, the Company shall effect such
registration, qualification, or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky (except that in no event shall the
Company be required to qualify to do business as a foreign corporation in any
jurisdiction where it would not, but for the requirements of this paragraph (c),
be required to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction) or other state securities laws and appropriate compliance with
applicable regulations issued under the Act and any other governmental
requirements or regulations) covering the Common Shares and other securities so
entitled to be registered as soon as practicable in accordance with the terms
hereof.
1.3 Subsequent S-3 Registration. In case the Company shall receive
---------------------------
from the Holders of at least fifty (50%) of the Warrant Shares issued or
issuable upon exercise of the Warrants, a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Warrant Shares owned by such
Holder or Holders, the Company shall:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) use all commercially reasonable efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and
2
<PAGE>
as would permit or facilitate the sale and distribution of all or such portion
of such Holders' Warrant Shares as are specified in such request, together with
all or such portion of the Warrant Shares of any other Holders joining in such
request as are specified in a written request given within fifteen (15) days
after receipt of such written notice from the Company, provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.3:
(i) if Form S-3 is not available for such offering by the
Holders;
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Warrant Shares and such other securities entitled to inclusion in such
registration (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,500,000;
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer or President of the Company
stating that in the good faith judgment of the board of directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than one hundred twenty (120) days after
receipt of the request of the Holder or Holders under this Section 1.3;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period;
(iv) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Agreement; or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Warrant Shares and other securities so
entitled to be registered as soon as practicable after receipt of the request or
requests of the Holders.
1.4 Obligations of the Company. When required under Section 1 to
--------------------------
effect the registration of the Registrable Securities, the Company shall:
(a) Prepare and file with the SEC, a registration statement on
Form S-3 with respect to such Registrable Securities and use all commercially
reasonable efforts to cause such registration statement to become effective,
and, subject to the provisions below, use commercially reasonable efforts to
keep such registration statement effective:
(i) In the event of a registration under Section 1.2 hereof,
until the earlier of (A) the date on which all of the Common Shares held by each
Holder can be sold without registration in a single transaction pursuant to Rule
144(k) of the Act, or (B) the date on which all of the Common Shares have been
sold to the public; or
3
<PAGE>
(ii) In the event of a registration under Section 1.3 hereof,
upon the request of the Holders of a majority of the Warrant Shares registered
thereunder, for a period of up to one hundred twenty (120) days or, for such
earlier period as is necessary to complete the distribution contemplated in the
registration statement;
(b) If at any time after a registration statement becomes
effective, the Company advises the Holders in writing that the registration
statement shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or any prospectus comprising a part of such
registration statement shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or the occurrence or existence of any pending corporate
development that, in the reasonable discretion of the Company, makes it
appropriate to suspend the availability of the registration statement and the
related prospectus, the Company shall give notice to the Holders that the
availability of the registration statement is suspended and the Holders shall
suspend any further sale of Registrable Securities pursuant to the registration
statement until the Holders have been informed in writing that the registration
statement is available. The Company shall be entitled to exercise its right to
suspend the availability of the registration statement for a period of not more
than sixty (60) days in any three (3) month period, not to exceed in the
aggregate ninety (90) days in any twelve (12) month period.
(c) Subject to subsections 1.4(a) and (b), prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(d) Furnish to the Holders requesting registration such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(e) Use commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act.
1.5 Information from Holders. It shall be a condition precedent
------------------------
to the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of a Holder that such Holder shall
furnish to the Company the information requested on Appendix 1.5 hereto, which
shall include such information regarding itself, himself or herself, any of the
Registrable Securities held by it, him or her, and the intended method of
disposition of such securities, and such other information as shall be
reasonably requested by the Company and required to effect the registration of
any of the Registrable Securities.
1.6 Expenses of Registration. All expenses of the Holders, except
------------------------
underwriting discounts (if any) or commissions, including (without limitation)
all registration, filing
4
<PAGE>
and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company shall be borne by the Company;
provided, however, that the Company shall not be required to pay any
professional fees incurred by any of the Holders.
1.7 Assignment of Registration Rights. The registration rights
---------------------------------
provided pursuant to Section 1.2 are not assignable. The rights to cause the
Company to register the Warrant Shares pursuant to Section 1.3 may be assigned
(but only with all related obligations) by a Holder to a transferee or assignee
of such securities that after such assignment or transfer, holds all of the
Warrant Shares issuable or issued upon conversion of the Warrants that were
previously held by such Holder, provided: (a) the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
1.8 Indemnification. With respect to all Registrable Securities
---------------
included in the registration statement referred to in this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners or officers, directors and shareholders
of each Holder, and each person, if any, who controls such Holder within the
meaning of the Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or any state securities laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) any omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities laws or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities laws; and the Company will reimburse each such Holder or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection l.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder or controlling person; provided further, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Holder, or any person controlling such Holder,
from whom the person asserting any such losses, claims, damages or liabilities
purchased shares in the offering, if a copy of the prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Holder to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the shares to such person,
5
<PAGE>
and if the prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers, each
person, if any, who controls the Company within the meaning of the Act, any
other Holder selling securities in such registration statement and any
controlling person of any such other Holder, against any losses, claims, damages
or liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Act, the 1934 Act or any state securities laws,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by Holder expressly for use in
connection with such registration; and Holder will reimburse any person intended
to be indemnified pursuant to this subsection l.8(b), for any legal or other
expenses reasonably incurred by such person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection l.8(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder (which
consent shall not be unreasonably withheld), provided that in no event shall any
indemnity under this subsection l.8(b) exceed the net proceeds from the offering
received by Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding.
(d) If the indemnification provided for in this Section 1.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
6
<PAGE>
(e) The obligations of each Holder under this Section 1.8 shall
survive the completion of any offering of Registrable Securities in the
registration statement under this Section 1, and otherwise.
1.9 Termination of Registration Rights. The registration rights
----------------------------------
provided in this Section 1 shall terminate with respect to a particular Holder
if all Registrable Securities held by such Holder may be sold pursuant to Rule
144 in any three (3) month period. Upon the termination of registration rights
pursuant to this Section 1.9, the Company shall have the right to withdraw the
registration statement, or any portion thereof, covering Registrable Securities.
2. Miscellaneous.
-------------
2.1 General. Nothing in this Agreement, express or implied, is
-------
intended to confer upon any party other than the parties hereto any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
2.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, nationally recognized overnight
courier service, or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
2.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders
holding a majority of the Registrable Securities.
2.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and
7
<PAGE>
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
2.9 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subject
matter hereof.
2.10 Issuance of Common Shares, Warrants and Warrant Shares. The
------------------------------------------------------
Holders hereby consent to the issuance of the Common Shares, Warrants and
Warrant Shares pursuant to the terms set forth in the Warrants and Purchase
Agreement. The Holders further agree to take any and all actions reasonably
necessary to evidence and effect such consent, including, but not limited to,
executing any necessary shareholder consents or proxies and voting all voting
securities of the Company then held by such Holder at any shareholder meeting in
favor of approving the aforementioned issuances.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DIGITAL GENERATION SYSTEMS, INC.:
By: /s/ Matthew E. Devine
____________________________________
Matthew E. Devine
Chief Executive Officer
Address:
Digital Generation Systems, Inc.
875 Battery Street
San Francisco, CA 94111
SIGNATURE PAGE TO DIGITAL GENERATION SYSTEMS, INC.
REGISTRATION RIGHTS AGREEMENT
<PAGE>
/s/ Scott K. Ginsburg
_______________________________________
Scott K. Ginsburg
Address:
5221 North O'Connor Boulevard, Suite 950
Irving, Texas 75039
SIGNATURE PAGE TO DIGITAL GENERATION SYSTEMS, INC.
REGISTRATION RIGHTS AGREEMENT
<PAGE>
APPENDIX 1.5
------------
SHAREHOLDER INFORMATION QUESTIONNAIRE:
All information furnished below by the undersigned for use in the Registration
Statement on Form S-3 is, and on the date such shares registered thereunder,
will be true, correct, and complete in all material respects, and does not, and
on the date on which the undersigned sells such shares, will not, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make such information not misleading. By completing and returning this
information statement, the undersigned hereby consents to the use of his or her
name, address, and share ownership information in the Form S-3 of Digital
Generation Systems, Inc.
Date.
- ----
Fill in Date: ______________________________
Name. Print:
- ----
Print and sign name or names ______________________________
exactly as name or names appear on
share certificate. If certificate ______________________________
is held in more than one name, all
must sign.
Sign:
______________________________
______________________________
Address.
- -------
Fill in your address: ______________________________
______________________________
______________________________
Appendix 1.5 - Page 1
<PAGE>
D. Stock Owned.
-----------
Fill in number of shares Of Record Beneficially
of Common Stock owned of
record and beneficially.
_____________________ ____________________
Aggregate Number of Shares of Common Stock to be Registered on Form S-3:
- -----------------------------------------------------------------------
_____________ Shares
F. Status.
------
The signatory hereto is an individual ( ), partnership ( ), corporation
( ), or other, as more fully described below ( ). The signatory is not acting
in a fiduciary capacity or as a nominee in selling shares in the public
offering, except as indicated below.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Appendix 1.5 - Page 2
<PAGE>
EXHIBIT 11
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
of
DIGITAL GENERATION SYSTEMS, INC.
Void after December 13, 2002
This Warrant is issued to Scott K. Ginsburg, or its registered
assigns ("Holder") by Digital Generation Systems, Inc., a California corporation
(the "Company"), on December 17, 1999 (the "Warrant Issue Date"). This Warrant
is issued pursuant to the terms of that certain Common Stock and Warrant
Purchase Agreement dated as of the date hereof (the "Purchase Agreement") in
connection with the Company's issuance to the Holder of shares of the Company's
Common Stock (the "Common Shares").
1. Purchase Shares. Subject to the terms and conditions hereinafter
---------------
set forth and set forth in the Purchase Agreement, the Holder is entitled, upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the holder hereof in writing), to
purchase from the Company up to One Hundred Twenty Thousand Eight Hundred Sixty-
Seven (120,867) fully paid and nonassessable shares of Common Stock of the
Company, as constituted on the Warrant Issue Date (the "Common Stock"). The
number of shares of Common Stock issuable pursuant to this Section 1 (the
"Shares") shall be subject to adjustment pursuant to Section 5 and Section 8
hereof.
2. Exercise Price. The purchase price for the Shares shall be
--------------
$5.171, as adjusted from time to time pursuant to Section 8 hereof (the
"Exercise Price").
3. Exercise Period. This Warrant shall not be exercisable prior to
---------------
December 13, 2000. Thereafter, this Warrant shall be exercisable as follows:
(a) This Warrant shall be exercisable with respect to 50% of the
Shares, in whole or in part with respect to such Shares, during the term
commencing on the date that the closing price of the Company's Common Stock on
the Nasdaq National Market has exceeded $10.00 per share (as adjusted for any
stock splits, stock dividends, recapitalizations or the like) for at least
twenty (20) of the preceding thirty (30) consecutive trading days and ending on
5:00 p.m. on December 17, 2002.
<PAGE>
(b) This Warrant shall become exercisable with respect to the
remaining Shares, in whole or in part, during the term commencing on the date
that the closing price of the Company's Common Stock on the Nasdaq National
Market has exceeded $15.00 per share (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) for at least twenty (20) of the
preceding thirty (30) consecutive trading days and ending on 5:00 p.m. on
December 17, 2002.
4. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed
copy of the form of Notice of Exercise attached hereto, to the Secretary of the
Company at its principal offices; and
(b) the payment to the Company of an amount equal to the aggregate
Exercise Price for the number of Shares being purchased.
5. Assumption of Warrant. If at any time, while this Warrant, or
---------------------
any portion thereof, is outstanding and unexpired there shall be (i) an
acquisition of the Company by another entity by means of a merger,
consolidation, or other transaction or series of related transactions resulting
in the exchange of the outstanding shares of the Company's capital stock such
that shareholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (ii) a
sale or transfer of all or substantially all of the Company's assets to any
other person, then, as a part of such acquisition, sale or transfer, lawful
provision shall be made so that the Holder shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
acquisition, sale or transfer which a holder of the shares deliverable upon
exercise of this Warrant would have been entitled to receive in such
acquisition, sale or transfer if this Warrant had been exercised immediately
before such acquisition, sale or transfer, all subject to further adjustment as
provided in this Section 5; and, in any such case, appropriate adjustment (as
determined by the Company's Board of Directors) shall be made in the application
of the provisions herein set forth with respect to the rights and interests
thereafter of the Holder to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
number of Shares the Holder is entitled to purchase) shall thereafter be
applicable, as nearly as possible, in relation to any shares of common stock or
other securities or other property thereafter deliverable upon the exercise of
this Warrant.
6. Certificates for Shares. Upon the exercise of the purchase
-----------------------
rights evidenced by this Warrant, one or more certificates for the number of
Shares so purchased shall be issued as soon as practicable thereafter (with
appropriate restrictive legends, if applicable), and in any event within thirty
(30) days of the delivery of the Notice of Exercise.
7. Issuance of Shares. The Company covenants that the Shares, when
------------------
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
2
<PAGE>
8. Adjustment of Exercise Price and Number of Shares. The number of
-------------------------------------------------
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
----------------------------------------------
shall at any time prior to the expiration of this Warrant subdivide its Common
Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock or Common Stock as a dividend with respect
to any shares of its Common Stock, the number of Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of
--------------------------------------------------
any reclassification, capital reorganization, or change in the Common Stock of
the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant, the kind and amount of shares
of stock and other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of
shares of Common Stock as were purchasable by the Holder immediately prior to
such reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the purchase price per
share payable hereunder, provided the aggregate purchase price shall remain the
same.
(c) Notice of Adjustment. When any adjustment is required to be
--------------------
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the Holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
10. No Shareholder Rights. Prior to exercise of this Warrant, the
---------------------
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of shareholder meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the Company.
However, nothing in this
3
<PAGE>
Section 10 shall limit the right of the Holder to be provided the notices
required under this Warrant or the Purchase Agreement.
11. Transfers of Warrant. Subject to compliance with applicable
--------------------
federal and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed, to the
Company at its principal offices, and the payment to the Company of all transfer
taxes and other governmental charges imposed on such transfer. In the event of
a partial transfer, the Company shall issue to the Holders one or more
appropriate new warrants.
12. Successors and Assigns. The terms and provisions of this Warrant
----------------------
and the Purchase Agreement shall inure to the benefit of, and be binding upon,
the Company and the Holders hereof and their respective successors and assigns.
13. Amendments and Waivers. Any term of this Warrant may be amended
----------------------
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.
14. Notices. All notices required under this Warrant shall be deemed
-------
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing). Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at such other place
as the Holder shall notify the Company hereof in writing).
15. Attorneys' Fees. If any action of law or equity is necessary to
---------------
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
16. Captions. The section and subsection headings of this Warrant
--------
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.
17. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
[remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, Digital Generation Systems, Inc. caused this
Warrant to be executed by an officer thereunto duly authorized.
DIGITAL GENERATION SYSTEMS, INC.
By: /s/ Matthew E. Devine
---------------------------------
Matthew E. Devine
Chief Executive Officer
5
<PAGE>
NOTICE OF EXERCISE
------------------
To: DIGITAL GENERATION SYSTEMS, INC.
The undersigned hereby elects to purchase _________________ shares of
Common Stock of Digital Generation Systems, Inc., pursuant to the terms of the
attached Warrant and payment of the Exercise Price per share required under such
Warrant accompanies this notice.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
with a view to distribution of such shares or any part thereof.
WARRANT HOLDER:
-------------------------------------
By:
---------------------------------
Address: ----------------------------
----------------------------
Date:
-------------------------
Name in which shares should be
registered:
- -------------------------------
6
