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EXHIBIT 10.40
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"). The Notice of Closing shall
specify 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 $3 million nor be less than $1 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 than one year
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after a party has purchased and fully paid for the shares to be sold, (iii) the
sale being effected through a "broker's transaction" or in transactions directly
with a "market maker" (as provided by Rule 144(f)) and (iv) the number of shares
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 for
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.
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e. Preexisting Personal or Business Relationship. Subscriber either has
a preexisting 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. Authorization. This agreement, upon acceptance by the Company, will
constitute a valid and legally binding obligation of Subscriber, enforceable in
accordance with its terms.
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 its 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 round in which the Shares are purchased, to use its diligent
efforts
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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 __________ __, 1998.
SUBSCRIBER
________________________________________
Signature
________________________________________
Print Name
Address: _______________________________
________________________________________
________________________________________
COMPANY
By: ____________________________________
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
preceding 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 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 purchasers 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 to Rights Agreement entered into as July 14, 1997 by and among the Company
and certain of is 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.
Nothing in this Section 2 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
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transaction pursuant to Rule 144(k) or (ii) the date on which Subscriber has
sold all of the Shares to the public.
