-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U0Q6Vx9xb6WHjebMdC/AfMHgEPjWQGvwfavsHvLsJV5i5NGeYXFkOMADKP1WDxj6 s7lLp+WPmMffac33iGe3mA== 0000928385-99-003688.txt : 19991224 0000928385-99-003688.hdr.sgml : 19991224 ACCESSION NUMBER: 0000928385-99-003688 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19991223 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL GENERATION SYSTEMS INC CENTRAL INDEX KEY: 0000934448 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 943140772 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-49603 FILM NUMBER: 99780243 BUSINESS ADDRESS: STREET 1: 875 BATTERY ST STREET 2: STE 1850 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4155466600 MAIL ADDRESS: STREET 1: 875 BATTERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GINSBURG SCOTT K CENTRAL INDEX KEY: 0001013565 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 17340 CLUB HILL DR CITY: DALLAS STATE: TX ZIP: 75248 MAIL ADDRESS: STREET 1: 17340 CLUB HILL DR CITY: DALLAS STATE: TX ZIP: 75248 SC 13D/A 1 AMENDMENT NO. 2 TO SCHEDULE 13D 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. 2) 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 22, 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 [ ]. 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 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/ - ------------------------------------------------------------------------------ 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/ 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. CUSIP No. 253921100 Page 3 of 9 Pages - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Moon Doggie Family Partnership - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [X] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS AF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF -0- SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 2,920,134 1/2/ OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING -0- PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 2,920,134 1/2/ - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------ 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. CUSIP No. 253921100 Page 4 of 9 Pages ITEM 1. SECURITY AND ISSUER. This Amendment No. 2 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: (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"):
(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, pursuant to a Common Stock Purchase Agreement dated as of December 17, 1999 by and among the Issuer, Mr. Ginsburg, and certain other purchasers (the "Common Stock 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 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. 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 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 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 9 Common Stock Purchase Agreement dated December 17, 1999 by and between Digital Generation Systems, Inc. and Scott K. Ginsburg. 3/ Exhibit 10 Registration Rights Agreement dated December 17, 1999 by and between Digital Generation Systems, Inc. and Scott K. Ginsburg. 3/ - ---------- 3/ Exhibits 9 and 10 hereof replace Exhibits 9 and 10 of Amendment No. 1 to Schedule 13D. Exhibit 11 of Amendment No. 1 is hereby deleted. 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 23, 1999 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 23, 1999 EX-9 2 EXHIBIT 9 EXHIBIT 9 COMMON STOCK PURCHASE AGREEMENT December 17, 1999 DIGITAL GENERATION SYSTEMS, INC. COMMON STOCK PURCHASE AGREEMENT THIS COMMON STOCK 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 two cents ($3,750,004.02) and at a price per share equal to five dollars and seventeen and one-tenth cents ($5.171) (the "Purchase Price"). 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 the sale and issuance to the Investors of the Common Shares. (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. 1.2 Closing. The purchase and sale of the Common Shares ------- 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 Shares 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 certificate representing the Common Shares that such Investor is purchasing, 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 A (the "Registration Rights Agreement"), the performance of all obligations of the Company hereunder and thereunder, and the authorization, issuance, sale and delivery of the Common Shares being sold hereunder 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 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. 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 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 to be received by such Investor 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 the Common Shares. 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. 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 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. If other than an individual, such Investor also represents it has not been organized for the purpose of acquiring the Common Shares. 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 3.6 Restricted Securities. Such Investor understands that the --------------------- Common Shares 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 Common Shares 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 ------- Common Shares 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 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 connection with the lawful issuance and sale of the Common Shares 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. To the extent any Investor or other person referred to above is subsequently relieved of the foregoing restrictions, all Investors will be relieved from such restriction on a pro rata basis. 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 Common Shares). 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 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 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. 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 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 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 /s/ Scott K. Ginsburg ---------------------------------------------- Scott K. Ginsburg Address: 5221 North O'Connor Boulevard Suite 950 Irving, Texas 75039 EXHIBIT A --------- Registration Rights Agreement EX-10 3 EXHIBIT 10 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") to certain of the Holders in a private placement transaction pursuant to that certain Common Stock 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 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 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. 1.2 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. 2 1.3 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 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. 3 (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 1.3(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. 1.4 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 1.4 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. 1.5 Expenses of Registration. All expenses of the Holders, except ------------------------ underwriting discounts (if any) or commissions, including (without limitation) all registration, filing 4 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. 1.6 Assignment of Registration Rights. The registration rights --------------------------------- provided pursuant to Section 1.2 are not assignable. 1.7 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.7(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 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.7(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.7(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.7(b) exceed the net proceeds from the offering received by Holder. (c) Promptly after receipt by an indemnified party under this Section 1.7 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 1.7, 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 1.7 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 (e) The obligations of each Holder under this Section 1.7 shall survive the completion of any offering of Registrable Securities in the registration statement under this Section 1, and otherwise. 1.8 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 1.8, 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 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. The Holders hereby consent to the ------------------------------------------------------------- issuance of the Common Shares pursuant to the terms set forth in the 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 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 /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 APPENDIX 1.4 ------------ 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 1.4 - Page 1 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 1.4 - Page 2 -----END PRIVACY-ENHANCED MESSAGE-----