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 Shares, No par value
(Title of Class of Securities)
253921100
(CUSIP Number)
Pequot Capital Management, Inc., 500 Nyala Farm Road
Westport, CT 06880 Attn: David J. Malat 203/429-2200
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 7, 2000
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Section 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box.
Check the following box if a fee is being paid with this statement __. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
CUSIP NO. 253921100
SCHEDULE 13D
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1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Pequot Capital Management, Inc.
06-1524885
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2. CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP*
(a)
(b)
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
00
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
CONNECTICUT
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7. SOLE VOTING POWER
4,987,911
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NUMBER OF SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY EACH 0
REPORTING ------------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER
4,987,911
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10. SHARED DISPOSITIVE POWER
0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,987,911
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.76%
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14. TYPE OF REPORTING PERSON*
IA
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Item 1. Security and Issuer
This Statement relates to the Common Stock, no par value (the "Shares"), of
Digital Generation Systems, Inc. (the "Company"), a California corporation.
The Company's principal executive office is located at 875 Battery street,
Suite 1850, San Francisco, California 94111.
Item 2. Identity and Background
This statement is being filed on behalf of Pequot Capital Management, Inc., a
Connecticut corporation (the "Reporting Person"). The principal business of
the Reporting Person, an investment adviser registered under the Investment
Advisers Act of 1940, is to act as investment adviser to certain managed
accounts. The executive officers of the Reporting Person are Messrs. Arthur
J. Samberg, Daniel C. Benton and Kevin E. O'Brien, the directors of the
Reporting Person are Messrs. Samberg, Benton and O'Brien, and the
controlling shareholders are Messrs. Samberg and Benton (collectively, the
"Executive Officers, Directors and Controlling Persons"). The business address
of the Reporting Person and the Executive Officers, Directors and Controlling
Persons is 500 Nyala Farm Road, Westport, CT 06880.
Neither of the Reporting Person nor the Executive Officers, Directors and
Controlling Persons have, during the last five years, been convicted in
criminal proceeding (excluding traffic violations or similar misdemeanors).
Neither of the Reporting Person nor the Executive Officers, Directors and
Controlling Persons have, during the last five years, been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction which
resulted in 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. Each of the Executive
Officers, Directors and the Controlling Persons are citizens of the United
States.
Item 3. Source and Amount of Funds or Other Consideration
As of the date hereof, under Rule 13d-3 under the Securities Exchange Act of
1934, the Reporting Person is deemed to be the beneficial owner of 4,987,911
of the Company's Shares ("Shares"), and 207,692 warrants (the "Warrants") to
which the reporting person disclaims beneficial ownership and which are not yet
exercisable due to the exercisability being subject to certain conditions based
on the trading prices of the underlying common stock. These conditions have
not been satisfied to date. The Shares and Warrants are held in the accounts
for which the Reporting Person exercises investment discretion (the
"Accounts"). As previously reported, the Reporting Person purchased 4,746,178
Shares in a private placement from the Company. In addition, in the same
private placement, the Reporting Person was granted 207,692 Warrants. The
Reporting Person purchased an additional 241,733 Shares on December 22, 1999
in a private placement.
Item 4. Purpose of Transaction
The holding of the Shares described herein was conducted in the ordinary course
of the Reporting Person's investment activities. The Reporting Person reserves
the right to purchase additional Shares or dispose of the Shares in the open
market or in privately negotiated transactions or in any other lawful manner in
the future. An employee of the Reporting Person serves on the Board of
Directors of the Company, which necessitated this filing. The Reporting Person
reserves the right to take whatever further action with respect to the
Accounts' holdings in the Company as the Reporting Person deems to be in the
best interest of such Accounts.
Item 5. Interest in Securities of the Issuer
As of the date hereof, the Reporting Person beneficially owns in the aggregate
4,987,911 Shares. These Shares represent approximately 17.76% of the 28,080,907
Shares that the Reporting Person believes to be outstanding. The Reporting
Person has the sole power to vote, direct the vote, dispose and direct the
disposition of all of the Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
On July 7, 2000, the Reporting Person signed a Voting Agreement (the "Voting
Agreement") with the Company relating to a proposed merger (the "Merger") of
SG Nevada Merger Sub, Inc., a wholly-owned subsidiary of the Company ("Merger
Sub") with and into StarGuide Digital Networks, Inc., pursuant to a certain
Agreement and Plan of Merger (the "Agreement"). Pursuant to such Voting
Agreement, the Reporting Person agreed that it would vote all of is 4,987,911
Shares in favor of adoption and approval of the Merger. In addition, pursuant
to the Voting Agreement, the Reporting Person has agreed not to sell, transfer,
pledge, encumber or otherwise dispose of any Shares or any voting interest in
such Shares until the earlier of the effective time of the Merger or the termi-
nation of the Agreement.
Item 7. Material to be Filed as Exhibits
Attached hereto as Exhibit A.
After a reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
July 27, 2000
Pequot Capital Management, Inc.
By:/s/ David J. Malat
David J. Malat, Chief Accounting Officer
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Exhibit A
VOTING AGREEMENT
DIGITAL GENERATION SYSTEMS, INC.
875 Battery Street
San Francisco, California
STARGUIDE DIGITAL NETWORKS, INC.
300 East Second Street
Suite 1150
Reno, Nevada
Ladies and Gentlemen:
The undersigned, Pequot Capital Management, Inc., a Connecticut corporation,
is a beneficial owner of, or has the right to vote, the number of shares set
forth on Schedule 1 hereto (the "Shares") of Digital Generation Systems, Inc.,
a corporation organized and existing under the laws of the State of California
(the "Company"), and wishes to facilitate the merger of SG Nevada Merger Sub,
Inc., a wholly- owned subsidiary of the Company ("Merger Sub"), with and into
StarGuide Digital Networks, Inc., a corporation organized and existing under
the laws of the State of Nevada ("StarGuide"), pursuant to that certain
Agreement and Plan of Merger by and among the Company, StarGuide and Merger Sub
dated as of July 7, 2000 (the "Agreement" and such merger, the "Merger"). The
undersigned recognizes that the Merger will be of benefit to the undersigned,
and that approval of the Merger by shareholders of the Company at a meeting of
Company shareholders (the "Company Shareholders Meeting") is a condition to the
consummation of the Merger and hereby executes and delivers this Voting
Agreement pursuant to Section 5.2 of the Agreement. All capitalized terms used
and not defined herein shall have the meanings assigned to them in the
Agreement.
In consideration of the foregoing and in order to induce StarGuide to act in
connection with the Merger, the undersigned hereby agrees, for the benefit of
the Company and of StarGuide, to (i) attend the Company Shareholders Meeting,
in person or by proxy, or by written consent in lieu of a shareholders meeting,
as applicable, and; (ii) vote (or cause to be voted) all Shares in favor of
adoption and approval of the Agreement, the Merger, and any other matters
necessary to consummate the transactions contemplated in the Agreement in order
to effectuate the Merger. The above agreement to vote shall apply also to any
adjournment or adjournments of the Company Shareholders Meeting.
From and after the date hereof through the earlier of the Effective Time of the
Merger or the termination of the Agreement, the undersigned hereby agrees not
to sell, transfer, pledge, encumber or otherwise dispose of any Shares or any
voting interest in such Shares (collectively, "Transfer"). Any such Transfer
of Shares shall be null and void, and such transferee shall have no rights as a
shareholder of the Company. To the extent inconsistent with the foregoing
provisions of this Voting Agreement, the undersigned hereby revokes any and all
proxies granted by him with respect to the Shares, and further agrees to
execute and deliver such additional instruments and other documents and to take
such further actions as may be necessary or appropriate to effectuate, carry
out, and comply with all of its obligations hereunder. Without limiting the
generality of the foregoing, the undersigned shall not enter into any agreement
or arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would impair its ability to effectuate, carry out,
or comply with all the terms of this Voting Agreement.
The undersigned represents and warrants that: (i) the undersigned has full
power and authority to enter into the agreements set forth herein; (ii) this
Voting Agreement has been duly executed and delivered and constitutes a valid
and binding obligation of the undersigned, enforceable against the undersigned
in accordance with its terms; and (iii) the Shares set forth on Schedule I
hereto are the only voting securities, or voting rights in capital stock of the
Company, owned (beneficially or of record) by the undersigned as of the date
hereof.
This Voting Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the undersigned and its respective successors and
assigns. The undersigned agrees that irreparable damage would occur if any
provision of this Voting Agreement were not performed in accordance with the
terms hereof and that StarGuide and/or the Company shall be entitled to an
injunction or injunctions to prevent breaches of this Voting Agreement or to
enforce specifically the performance of the terms and provisions hereof in any
federal court located in the State of California or any California state court,
in addition to any other remedy to which it is entitled at law or in equity.
In the event that the Agreement is terminated in accordance with its terms,
this Voting Agreement shall automatically terminate and be of no further force
or effect. Upon such termination, except for any rights StarGuide or the
Company may have in respect of any breach by the undersigned of its obligations
hereunder, there shall be no further obligation or liability hereunder.
Very Truly Yours,
Pequot Capital Management, Inc.,
a Connecticut corporation
By:/s/ Kevin E. O'Brien
Its: General Counsel
dated this 7th day of July, 2000.
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Schedule 1
COMPANY SHARES
Type: Number:
Common Stock 4,987,911
