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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. 3)
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
April 4, 2000
-----------------
(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
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Scott K. Ginsburg
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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SOLE VOTING POWER
7
NUMBER OF 1,326,418
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
2,920,134 1/
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 1,326,418
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,920,134 1/
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,246,552 1/2/
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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)
15.5%
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14 TYPE OF REPORTING PERSON*
IN
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1/ Consists of 2,920,134 shares held of record by Moon Doggie Family
Partnership, a partnership of which Mr. Ginsburg is the sole general partner.
Mr. Ginsburg, in such capacity, holds voting and dispositive power over these
shares.
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CUSIP No. 253921100 Page 3 of 9 Pages
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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]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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SOLE VOTING POWER
7
NUMBER OF -0-
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
2,920,134 1/2/
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,920,134 1/2/
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,920,134 3/
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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%
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14 TYPE OF REPORTING PERSON*
PN
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2/ 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. 3 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
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.
[Not appliable]
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.
On April 4, 2000, with Mr. Ginsburg's approval, StarGuide submitted a
written, non-binding indication of interest regarding a possible combination of
StarGuide and the Issuer in a tax-free, stock-for-stock reorganization. See
Exhibit 11. The indication of interest was submitted in response to a
solicitation by the financial advisor to a special committee of the Issuer's
board of directors. The indication of interest proposes that representatives of
the Issuer and StarGuide promptly commence discussions regarding the structure
and terms of such a combination.
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. 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. By agreement of all of the investors, the warrants to purchase
120,867 shares of Common Stock of the Issuer, which were issued to Mr. Ginsburg
on December 17, 1999, were rescinded and are not outstanding.
Moon Doggie: 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
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 Purchase Agreement, pursuant to
which Mr. Ginsburg agreed to purchase 241,733 shares of Common Stock at a
purchase price of approximately $5.171 per share. The foregoing summary of such
agreement is qualified in its entirety by reference to Exhibit 9, which is
hereby incorporated by reference. By agreement of all of the investors, the
warrants to purchase 120,867 shares of Common Stock of the Issuer, which were
issued to Mr. Ginsburg on December 17, 1999, were rescinded and are not
outstanding.
(e) On December 17, 1999, the Issuer, Mr. Ginsburg, and certain
other investors entered into a Registration Rights Agreement, granting
Mr. Ginsburg certain registration rights with respect to the shares purchased by
Mr. Ginsburg pursuant to the Common Stock Purchase Agreement. The foregoing
summary of such agreement is qualified in its entirety by reference to
Exhibit 10, which is hereby incorporated by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 11 Letter from StarGuide Digital Networks, Inc. to Digital Generation
Systems, Inc. dated April 4, 2000 regarding a non-binding indication
of interest in a possible combination of StarGuide and the Issuer.
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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: April 4, 2000
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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: April 4, 2000
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EXHIBIT 11
[LETTERHEAD OF STARGUIDE DIGITAL NETWORKS, INC.]
April 4, 2000
Daniel J. Goggins
Managing Director
Chase, Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Dear Mr. Goggins:
We are pleased to submit this non-binding indication of interest
to combine StarGuide Digital Networks, Inc. ("StarGuide"), a private company
controlled by Scott K. Ginsburg, with Digital Generation Systems, Inc. ("DG") in
a tax-free stock-for-stock reorganization. We propose that representatives of
StarGuide and DG promptly commence discussions regarding the structure and
specific terms of such a combination.
Although this transaction would require the approval of both
parties' shareholders and board of directors, we advise you that all voting
shares of StarGuide are currently subject to a Voting Trust Agreement under
which such shares are voted by Mr. Ginsburg. Mr. Ginsburg has approved the
commencement of these discussions and will support such a transaction on
mutually agreeable terms. Consummation of the transaction will be subject to the
expiration of the appropriate waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act.
We, together with our legal counsel and financial advisors, are
prepared to begin negotiating definitive documents immediately, and to complete
our business due diligence promptly.
This proposal will expire at the close of business on Friday,
April 14, 2000. We ask that you respond to this proposal by contacting our
legal counsel, Eric Bernthal (202-637-2236), Raymond Grochowski (202-637-2189),
or Randall Bassett (212-891-8383) or Latham & Watkins.
Very truly yours,
StarGuide Digital Networks, Inc.
By: /s/ Jeffrey A. Dankworth
-----------------------------
Jeffrey A. Dankworth
President
