EXHIBIT 2
DIGITAL GENERATION SYSTEMS, INC.
Common Stock Subscription Agreement
Subject to the terms and conditions of this Agreement, the undersigned
("Subscriber") hereby offers and agrees to purchase shares of Common Stock (the
"Shares") of Digital Generation Systems, Inc., a California corporation (the
"Company"), and the Company agrees to sell the Shares to Subscriber.
1. The closing of the purchase and sale of the Shares under this Agreement (the
"Closing") shall be held on such date and at such time as the Company shall
select in writing (the "Notice of Closing"), which date shall in no event (i) be
more than sixty (60) days following the date of this Agreement, (ii) be less
than two (2) business days after receipt by the Subscriber of the Notice of
Closing.
2. The price per share shall be equal to the average closing price of the
Company's common stock during the fifteen (15) trading days immediately prior to
the Notice of Closing (the "Purchase Price") and the number of Shares to be sold
by the Company and purchased by Subscriber. The aggregate Purchase Price for
the Shares shall not exceed $8 million nor be less than $6 million.
3. Subscriber, by offering and agreeing to purchase the Shares, (a) hereby
represents and warrants to the Company that all information provided by
Subscriber herewith is true and correct and (b) hereby represents and warrants
to the Company as follows:
a. Investment. Subscriber is acquiring the Shares for investment for
Subscriber's own account, not as a nominee or agent, and not with the view to,
or for resale in connection with, any distribution thereof in violation of
applicable securities laws. Subscriber understands that such Shares have not
been, and will not be, registered under the Securities Act of 1933, as amended,
(the "Securities Act") by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Subscriber's
representations as expressed herein.
b. Rule 144. Subscriber acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Subscriber is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, except as otherwise permitted
under Rule 144(k), if applicable, (i) the availability of certain current public
information about the Company, (ii) the resale occurring not less that one year
after a party has purchased and fully paid for the shares to be sold, (iii) the
sale being effected through a "broker transaction" or in transactions directly
with a "market maker" (as provided by Rule 144(f) and (iv) the number of share
being sold during any three-month period not exceeding specified limitations.
c. Legends. Subscriber agrees that each certificate or other document
evidencing any of the Shares shall be endorsed with the legend set forth below.
Subscriber agrees not to transfer the Shares represented by any such certificate
without complying with the restrictions on transfer described in the legend
endorsed on such certificate.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS, THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE
ABSENCE OF SUCH REGISTRATION OR QUALIFICATION, WITHOUT AN OPINION OF COUNSEL FOR
THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT. THIS CERTIFICATE MUST BE SURRENDERED TO THE CORPORATION OR ITS TRANSFER
AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY INTEREST IN THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
d. Access to Data. Subscriber has requested and received from the Company
all the information Subscriber considers necessary or appropriate fro deciding
whether to purchase the Shares. Subscriber has received and reviewed copies of
the Company's filings with the Securities and Exchange Commission. Subscriber
has had an opportunity to ask questions of and receiver answers from management
of the Company concerning the Company, the Company's business and financial
affairs and the Subscriber's purchase of Shares hereunder. Subscriber has had
such questions answered to Subscriber's satisfaction. Subscriber understands
that any information contained in any written documentation or made by
management during discussions with the Company were intended to describe the
aspects of the Company's business and prospects which the Company believes to be
material, but such information does not necessarily provide a thorough
exhaustive description. Subscriber acknowledges that any estimates or
projections as to events that may occur in the future were based upon the best
judgment of the Company's management at the time such estimates or projections
were made and that whether or not such estimates or projections will depend upon
the Company's achieving its overall business objectives, including availability
of funds resulting from the sale of the Shares. Subscriber acknowledges there
is no assurance that any projections will be attained.
e. Pre-existing Personal or Business Relationship. Subscriber either has
a pre-existing personal or business relationship with the Company or any of its
officers, directors or controlling persons or, by reason of Subscriber's
business or financial experience, could be reasonably assumed to have the
capacity to protect Subscriber's own interests in connection with the purchase
of the Shares.
f. Authorisation. This agreement, upon acceptance by the Company, will
constitute a valid and legally binding obligation of Subscriber, enforceable in
accordance with its terms.
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g. Brokers or Finders. There are no arrangements or claims for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this agreement or any transaction contemplated hereby based on any
arrangement or agreement known to Subscriber.
h. No Reliance on Third Parties. In purchasing the Shares, Subscriber is
not relying upon any representation or assurance from any person.
i. Risk of Investment. Subscriber understands the risks inherent in new
ventures and the risks associated with unproven technologies such as those of
the company, and Subscriber has experience in investing in such ventures.
Subscriber can bear the entire loss of his investment in the Company.
j. No Legal Tax or Investment Advice. Subscriber understands that nothing
in this Agreement or any other materials presented to Subscriber or information
provided by the Company's management in connection with the purchase and sale of
the Shares constitutes legal, tax, or investment advice. Subscriber has
consulted such legal, tax, and investment advisors as it, in it sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Shares.
4. Address. Subscriber's address listed below is true and correct.
5. Subscriber understands that the final number of Shares which may be
purchased by Subscriber will be determined by the Company and that this offer to
purchase Shares is subject to acceptance, in whole or in part, by the Company.
Funds not accepted for the purchase of Shares will be refunded.
6. At the Closing, and upon receipt of Subscriber's payment by check or wire
transfer payable to the Company of the Purchase Price, the Company will cause a
stock certificate representing the Shares purchased by Subscriber to be
prepared, and the Company will cause such stock certificate to be transmitted to
the Subscriber at the address shown below.
7. By accepting below, the Company undertakes, within 60 days of the closing of
the rounds in which the Shares are purchased, to use its diligent efforts to
prepare and file a registration statement with the Securities and Exchange
Commission on Form S-3 registering the Shares under the Securities Act of 1933,
as amended and hereby represents, warrants, covenants and agrees as to the
matters set forth on Annex I attached hereto.
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IN WITNESS WHEREOF, Subscriber and the Company hereby execute this
Agreement as of September 25, 1998.
SUBSCRIBER
/s/ Xxxxx X. Xxxxxxxx
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Signature
Xxxxx X. Xxxxxxxx
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Print Name
Address:17340 Club Hill Drive
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Xxxxxx, Xxxxx 00000
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COMPANY
By: /s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx, President
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ANNEX I TO SUBSCRIPTION AGREEMENT
1. By executing the attached Subscription Agreement (the
"Agreement"), the Company hereby represents and warrants to Subscriber that:
(a) the Shares have been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-assessable; (b) the Company has registered
its Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the Common Stock is listed and traded on
the NASDAQ National Market and the Company has timely filed all material
required to be filed pursuant to all reporting obligations under either Section
13(a) or 15(d) of the Exchange Act for a period of at least twelve (12) months
immediately proceeding the offer or sale of the Shares; (c) the Company has
legally available sufficient authorized and unissued Common Stock as may be
reasonably necessary to effect the sale and issuance of the Shares; (d) the
Agreement has been duly and validly authorized by the Company and, when executed
and delivered by the Company, will be the valid and binding agreement of the
Company enforceable in accordance with its terms; (e) the execution and delivery
of the Agreement by the Company, the issuance of the Shares, and the
consummation by the Company of the other transactions contemplated by the
Agreement, do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws of the Company, or any material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, or any material existing applicable law, rule or
regulation or any applicable decree, judgment, or order of any court or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein, and (f) no
authorization, approval or consent of any court, governmental body, regulatory
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained by the
Company for the issuance and sale of the Shares to Subscriber as contemplated by
the Agreement, except such authorizations, approvals and consents that have been
obtained.
2. By accepting Subscriber's offer to purchase the Shares, the
company hereby agrees to enter into a separate registration rights agreement
with Subscriber (and any other purchaser of common stock of the company in the
same round in which the Shares are purchased granting Subscriber the demand
registration rights contained in Section 1.3 of the Amendment and Restatement
No.5 of Rights Agreement entered into as July 14, 1997 by and among the Company
and certain of its securityholders, which rights shall apply to the registration
statement on Form S-3 referred to in Section 5 of the Agreement. The demand
registration rights so granted will be exercisable no earlier than sixty (60)
days following the closing of the round in which the Shares are purchased.
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Nothing in this Section is intended to limit the Company's obligations
under Section 5 of the Agreement to file the Form S-3. Notwithstanding anything
herein to the contrary, the Form S-3 shall be maintained effective by the
Company until the earlier of (i) the date as to which Subscriber may sell all of
the Shares without registration in a single transaction pursuant to Rule 144 (k)
or (ii) the date on which Subscriber has sold all of the Shares to the public.
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