Pending Merger Transaction with Extreme Reach	9 Months Ended
Sep. 30, 2013
Pending Merger Transaction with Extreme Reach
Pending Merger Transaction with Extreme Reach	1. Pending Merger Transaction with Extreme Reach On August 12, 2013, Digital Generation, Inc. and subsidiaries (the “Company,” “we,” “us” or “our”) entered into a merger agreement with Extreme Reach, Inc. (“ER”) and a wholly-owned subsidiary of ER whereby the parties agreed to a series of transactions summarized as follows: (i) ER will pay us $485 million which we will use primarily to retire all of our outstanding debt ($386 million at September 30, 2013) and fund a distribution to our shareholders of $3 per share; (ii) We will contribute our online business, and substantially all the working capital of our television business, to a newly formed wholly-owned subsidiary (“NewCo”); (iii) NewCo, if requested by ER, will purchase an amount of ER’s preferred stock valued at $45 million for a purchase price of $40 million, otherwise, ER will pay NewCo $5 million at closing. NewCo’s agreement to purchase ER’s preferred stock is intended to facilitate closing of the transaction; (iv) Immediately prior to consummating the merger, we will distribute the shares of NewCo to our shareholders and NewCo will become a newly issued publicly held company; and (v) DG, which at this point will consist of the television business without any debt or working capital, will merge with one of ER’s subsidiaries and will then become a wholly-owned subsidiary of ER. In effect, we have agreed to sell our television business, excluding its working capital, to ER for $485 million. NewCo will become a publicly traded company with our online business. The transaction is expected to close during the first quarter of 2014 and is subject to the satisfaction of certain conditions including (i) approval from our stockholders and (ii) ER obtaining financing on specified terms. As part of the transaction and immediately prior to closing, all outstanding and unvested restricted stock units (“RSUs”) and stock options will become fully vested. The RSUs will be converted into shares of our common stock and in-the-money stock options will be converted into shares of our common stock on a net exercise basis. All of our equity incentive plans will be terminated at or immediately prior to closing. Our outstanding shares will be partially redeemed for shares of NewCo which are expected to be listed on the NASDAQ Global Market. In addition to ongoing costs related to the transaction such as legal and accounting fees and retention costs, there are also investment banking fees to be paid upon the successful completion of the transaction. These and other considerations will be set forth in greater detail in a proxy and information statement that we will file with the Securities and Exchange Commission (“SEC”) and distribute to our stockholders in advance of a special meeting anticipated to be held in the first quarter of 2014 to approve the transaction.

1. Pending Merger Transaction with Extreme Reach

On August 12, 2013, Digital Generation, Inc. and subsidiaries (the “Company,” “we,” “us” or “our”) entered into a merger agreement with Extreme Reach, Inc. (“ER”) and a wholly-owned subsidiary of ER whereby the parties agreed to a series of transactions summarized as follows:

(i) ER will pay us $485 million which we will use primarily to retire all of our outstanding debt ($386 million at September 30, 2013) and fund a distribution to our shareholders of $3 per share;

(ii) We will contribute our online business, and substantially all the working capital of our television business, to a newly formed wholly-owned subsidiary (“NewCo”);

(iii) NewCo, if requested by ER, will purchase an amount of ER’s preferred stock valued at $45 million for a purchase price of $40 million, otherwise, ER will pay NewCo $5 million at closing. NewCo’s agreement to purchase ER’s preferred stock is intended to facilitate closing of the transaction;

(iv) Immediately prior to consummating the merger, we will distribute the shares of NewCo to our shareholders and NewCo will become a newly issued publicly held company; and

(v) DG, which at this point will consist of the television business without any debt or working capital, will merge with one of ER’s subsidiaries and will then become a wholly-owned subsidiary of ER.

In effect, we have agreed to sell our television business, excluding its working capital, to ER for $485 million. NewCo will become a publicly traded company with our online business.

The transaction is expected to close during the first quarter of 2014 and is subject to the satisfaction of certain conditions including (i) approval from our stockholders and (ii) ER obtaining financing on specified terms. As part of the transaction and immediately prior to closing, all outstanding and unvested restricted stock units (“RSUs”) and stock options will become fully vested. The RSUs will be converted into shares of our common stock and in-the-money stock options will be converted into shares of our common stock on a net exercise basis. All of our equity incentive plans will be terminated at or immediately prior to closing. Our outstanding shares will be partially redeemed for shares of NewCo which are expected to be listed on the NASDAQ Global Market. In addition to ongoing costs related to the transaction such as legal and accounting fees and retention costs, there are also investment banking fees to be paid upon the successful completion of the transaction.

These and other considerations will be set forth in greater detail in a proxy and information statement that we will file with the Securities and Exchange Commission (“SEC”) and distribute to our stockholders in advance of a special meeting anticipated to be held in the first quarter of 2014 to approve the transaction.