Exhibit 10.23













FIRST AMENDED AND RESTATED        AGREEMENT AND PLAN OF MERGER        BY AND AMONG        DIGITAL GENERATION SYSTEMS, INC.,        DG ACQUISITION CORP. IV    
   AND        FASTCHANNEL NETWORK, INC.        DATED AS OF JANUARY 13, 2006















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TABLE OF CONTENTS

|                                                                 |              |   |                                                                                           | Page
|---------------------------------------------------------------- | ------------ | - | ----------------------------------------------------------------------------------------- | ----
|Article 1.    The Merger                                         |              | 2
|                                                                 | Section 1.1  |   | The Merger                                                                                |     
|                                                                 | Section 1.2  |   | Effective Time                                                                            |     
|                                                                 | Section 1.3  |   | Effect of the Merger                                                                      |     
|                                                                 | Section 1.4  |   | Certificate of Incorporation; By-laws                                                     |     
|                                                                 | Section 1.5  |   | Directors and Officers                                                                    |     
|                                                                 | Section 1.6  |   | Tax Consequences                                                                          |     
|Article 2.    Conversion of Securities; Exchange of Certificates |              | 3
|                                                                 | Section 2.1  |   | Conversion of Securities                                                                  |     
|                                                                 | Section 2.2  |   | Exchange of Certificates                                                                  |     
|                                                                 | Section 2.3  |   | Stock Transfer Books                                                                      |     
|                                                                 | Section 2.4  |   | Company Options, Warrants and Rights                                                      |     
|                                                                 | Section 2.5  |   | Dissenters' Rights                                                                        |     
|Article 3.    Representations and Warranties of the Company      |              | 7
|                                                                 | Section 3.1  |   | Organization and Good Standing                                                            |     
|                                                                 | Section 3.2  |   | Corporate Records                                                                         |     
|                                                                 | Section 3.3  |   | Corporate Power and Authority                                                             |     
|                                                                 | Section 3.4  |   | Capitalization                                                                            |     
|                                                                 | Section 3.5  |   | Subsidiaries                                                                              |     
|                                                                 | Section 3.6  |   | No Violation                                                                              |     
|                                                                 | Section 3.7  |   | Approvals                                                                                 |     
|                                                                 | Section 3.8  |   | Financial Statements; No Undisclosed Liabilities                                          |     
|                                                                 | Section 3.9  |   | Ordinary Course Operations                                                                |     
|                                                                 | Section 3.10 |   | Leases of Personal and Real Property; Owned Real Property; Material Contracts; No Default |     
|                                                                 | Section 3.11 |   | Intellectual Property Matters                                                             |     
|                                                                 | Section 3.12 |   | Litigation                                                                                |     
|                                                                 | Section 3.13 |   | Compliance with Laws; Permits                                                             |     
|                                                                 | Section 3.14 |   | Taxes                                                                                     |     
|                                                                 | Section 3.15 |   | Insurance                                                                                 |     
|                                                                 | Section 3.16 |   | Employee Benefit Plans                                                                    |     
|                                                                 | Section 3.17 |   | Employees                                                                                 |     
|                                                                 |              |   |                                                                                           |     

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|                                                                      | Section 3.18 |    | Personal Property; Assets                                                                  |  | 21
|--------------------------------------------------------------------- | ------------ | -- | ------------------------------------------------------------------------------------------ |  | --
|                                                                      | Section 3.19 |    | Environmental Matters                                                                      |  | 22
|                                                                      | Section 3.20 |    | Fees                                                                                       |  | 22
|                                                                      | Section 3.21 |    | Related-Party Transactions                                                                 |  | 22
|                                                                      | Section 3.22 |    | Acquisitions                                                                               |  | 22
|                                                                      | Section 3.23 |    | Proxy Statement and Registration Statement                                                 |  | 22
|                                                                      | Section 3.24 |    | Tax Treatment                                                                              |  | 23
|                                                                      | Section 3.25 |    | Vote Required                                                                              |  | 23
|                                                                      | Section 3.26 |    | Opinion of Financial Advisor                                                               |  | 23
|                                                                      | Section 3.27 |    | Disclosure                                                                                 |  | 23
|                                                                      | Section 3.28 |    | Reserved                                                                                   |  | 23
|                                                                      | Section 3.29 |    | Releases                                                                                   |  | 23
|Article 4.    Representations and Warranties of Parent and Merger Sub |              | 23
|                                                                      | Section 4.1  |    | Organization and Good Standing                                                             |  | 23
|                                                                      | Section 4.2  |    | Certificate of Incorporation and By-laws; Corporate Books and Records                      |  | 24
|                                                                      | Section 4.3  |    | Corporate Power and Authority                                                              |  | 24
|                                                                      | Section 4.4  |    | Capitalization                                                                             |  | 24
|                                                                      | Section 4.5  |    | Subsidiaries                                                                               |  | 25
|                                                                      | Section 4.6  |    | No Conflict; Required Filings and Consents                                                 |  | 25
|                                                                      | Section 4.7  |    | SEC Filings; Financial Statements                                                          |  | 26
|                                                                      | Section 4.8  |    | Leases of Personal and Real Property; Owned Real Property; Scheduled Contracts; No Default |  | 27
|                                                                      | Section 4.9  |    | Ordinary Course Operations                                                                 |  | 28
|                                                                      | Section 4.10 |    | Litigation                                                                                 |  | 28
|                                                                      | Section 4.11 |    | Compliance with Laws; Permits                                                              |  | 29
|                                                                      | Section 4.12 |    | Disclosure Documents                                                                       |  | 29
|                                                                      | Section 4.13 |    | Intellectual Property Matters                                                              |  | 29
|                                                                      | Section 4.14 |    | Tax Treatment                                                                              |  | 31
|                                                                      | Section 4.15 |    | Taxes                                                                                      |  | 31
|                                                                      | Section 4.16 |    | Insurance                                                                                  |  | 33
|                                                                      | Section 4.17 |    | Ownership of Merger Sub; No Prior Activities                                               |  | 33
|                                                                      | Section 4.18 |    | Employee Benefit Plans                                                                     |  | 34
|                                                                      | Section 4.19 |    | Employees                                                                                  |  | 35
|                                                                      |              |    |                                                                                            | 

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|                        | Section 4.20 |    | Fees                                                                        |  | 36
|----------------------- | ------------ | -- | --------------------------------------------------------------------------- |  | --
|                        | Section 4.21 |    | Personal Property; Assets                                                   |  | 36
|                        | Section 4.22 |    | Environmental Matters                                                       |  | 37
|                        | Section 4.23 |    | Vote Required                                                               |  | 37
|                        | Section 4.24 |    | Disclosure                                                                  |  | 37
|                        | Section 4.25 |    | Opinion of Financial Advisor                                                |  | 37
|                        | Section 4.26 |    | Related-Party Transactions                                                  |  | 37
|Article 5.    Covenants |              | 38
|                        | Section 5.1  |    | Conduct of Business by the Company Pending the Closing                      |  | 38
|                        | Section 5.2  |    | Conduct of Business by Parent Pending the Closing                           |  | 41
|                        | Section 5.3  |    | Cooperation                                                                 |  | 43
|                        | Section 5.4  |    | Registration Statement; Proxy Statement                                     |  | 44
|                        | Section 5.5  |    | Stockholders' Meetings                                                      |  | 44
|                        | Section 5.6  |    | Access to Company Information; Confidentiality                              |  | 45
|                        | Section 5.7  |    | Access to Parent Information; Confidentiality                               |  | 45
|                        | Section 5.8  |    | No Solicitation of Transactions                                             |  | 46
|                        | Section 5.9  |    | Appropriate Action; Consents; Filings                                       |  | 47
|                        | Section 5.10 |    | Reserved                                                                    |  | 48
|                        | Section 5.11 |    | Certain Notices                                                             |  | 48
|                        | Section 5.12 |    | Public Announcements                                                        |  | 49
|                        | Section 5.13 |    | NASDAQ Listing                                                              |  | 49
|                        | Section 5.14 |    | Employee Benefit Matters                                                    |  | 49
|                        | Section 5.15 |    | Indemnification of Parent Directors and Officers                            |  | 49
|                        | Section 5.16 |    | Indemnification of Company Directors and Officers                           |  | 50
|                        | Section 5.17 |    | Tax Matters                                                                 |  | 50
|                        | Section 5.18 |    | Affiliate Letters                                                           |  | 51
|                        | Section 5.19 |    | Delivery of Financial Statements                                            |  | 51
|                        | Section 5.20 |    | Transitional Matters                                                        |  | 52
|                        | Section 5.21 |    | FIRPTA Certification                                                        |  | 52
|                        | Section 5.22 |    | Parent Financing                                                            |  | 52
|                        | Section 5.23 |    | Amendment of Parent Bylaws                                                  |  | 52
|                        | Section 5.24 |    | Amendment of Company Charter and Termination of Investor's Rights Agreement |  | 53
|                        |              |    |                                                                             | 

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|                                                | Section 5.25 |    | Roland and Series F Releases                                  |  | 53
|----------------------------------------------- | ------------ | -- | ------------------------------------------------------------- |  | --
|Article 6.    Closing Conditions                |              | 53
|                                                | Section 6.1  |    | Conditions to Obligations of Each Party Under This Agreement  |  | 53
|                                                | Section 6.2  |    | Additional Conditions to Obligations of Parent and Merger Sub |  | 53
|                                                | Section 6.3  |    | Additional Conditions to Obligations of the Company           |  | 54
|Article 7.    Termination, Amendment and Waiver |              | 55
|                                                | Section 7.1  |    | Termination                                                   |  | 55
|                                                | Section 7.2  |    | Effect of Termination                                         |  | 56
|                                                | Section 7.3  |    | Amendment                                                     |  | 57
|                                                | Section 7.4  |    | Waiver                                                        |  | 57
|                                                | Section 7.5  |    | Fees and Expenses                                             |  | 58
|Article 8.    General Provisions                |              | 58
|                                                | Section 8.1  |    | General Survival                                              |  | 58
|                                                | Section 8.2  |    | Notices                                                       |  | 58
|                                                | Section 8.3  |    | Definitions                                                   |  | 59
|                                                | Section 8.4  |    | Accounting Terms                                              |  | 64
|                                                | Section 8.5  |    | Certain Terms                                                 |  | 64
|                                                | Section 8.6  |    | Terms Defined Elsewhere                                       |  | 64
|                                                | Section 8.7  |    | Rules of Construction                                         |  | 66
|                                                | Section 8.8  |    | Descriptive Headings                                          |  | 66
|                                                | Section 8.9  |    | Severability                                                  |  | 66
|                                                | Section 8.10 |    | Entire Agreement                                              |  | 66
|                                                | Section 8.11 |    | Assignment                                                    |  | 66
|                                                | Section 8.12 |    | Parties in Interest                                           |  | 66
|                                                | Section 8.13 |    | Governing Law                                                 |  | 67
|                                                | Section 8.14 |    | Consent to Jurisdiction                                       |  | 67
|                                                | Section 8.15 |    | Jury Trial Waiver                                             |  | 67
|                                                | Section 8.16 |    | Disclosure                                                    |  | 67
|                                                | Section 8.17 |    | Counterparts                                                  |  | 67
|                                                | Section 8.18 |    | Specific Performance                                          |  | 67

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FIRST AMENDED AND RESTATED  AGREEMENT AND PLAN OF MERGER

This FIRST AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of January 13, 2006, by and among Digital Generation Systems, Inc., a
Delaware corporation ("Parent"), DG Acquisition Corp. IV, a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and FastChannel Network, Inc., a Delaware corporation
(the "Company"). Certain capitalized terms used herein have the meanings assigned to them in Section 8.3 or elsewhere in this Agreement as described in Section 8.6.

WHEREAS,
on December 15, 2005, Parent, Merger Sub, and the Company entered into that certain Agreement and Plan of Merger (the "Initial Merger Agreement");

WHEREAS,
entering into this Agreement, Parent, Merger Sub, and the Company intend to amend and restate the Initial Merger Agreement in its entirety;

WHEREAS,
the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable the merger of Merger Sub with and into the Company (the "Merger")
upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL");

WHEREAS,
the respective Boards of Directors of Parent and the Company have determined that the Merger is in furtherance of and consistent with their respective business strategies and is
in the best interest of their respective stockholders, and Parent has approved this Agreement and the Merger as the sole stockholder of Merger Sub;

WHEREAS,
as a condition to and inducement to the Company's willingness to enter into this Agreement, simultaneously with the execution of this Agreement, Scott Ginsburg, the Chief
Executive Officer and a stockholder of Parent is entering into a voting agreement (the "Ginsburg Voting Agreement") pursuant to which he agrees to vote all shares of Parent's capital stock held by him
in favor of the Parent Stockholder Approval at any meeting of Parent Stockholders relating to the transactions contemplated hereby;

WHEREAS,
as a condition to and inducement to Parent's and the Merger Sub's willingness to enter into this Agreement, simultaneously with the execution of this Agreement, certain
stockholders of the Company that together control a majority of the shares of the Company's capital stock entitled to vote on such matters are entering into a voting agreement (the "Company
Stockholder Voting Agreement") pursuant to which such stockholders agree to vote all shares of the Company's capital stock held by such stockholders in favor of approval and adoption of this Agreement
and the transactions contemplated hereby at any meeting of the Company Stockholders relating to the adoption and approval of this Agreement and the transactions contemplated hereby;

WHEREAS,
as a further condition to and inducement to the Company's willingness to enter into this Agreement, prior to the Effective Time Scott Ginsburg will enter into an agreement in a
form reasonably acceptable to the Company and Mr. Ginsburg (the "Standstill and Registration Rights Agreement") pursuant to which Mr. Ginsburg will, (i) subject to certain
exceptions, agree to refrain from taking certain actions intended to effect a takeover of Parent after the consummation of the Merger for a period commencing on the Closing Date and ending on the
first anniversary of the Closing Date and (ii) be granted certain registration rights with respect to sales of the Parent Common Stock held by him; and

WHEREAS,
as a further condition to and inducement to Parent's and the Merger Sub's willingness to enter into this Agreement, prior to the Effective Time certain stockholders of the
Company will enter into a lockup agreement in a form reasonably acceptable to Parent (the "Lockup Agreement") pursuant to which such stockholders will, subject to certain customary exceptions, agree
to

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refrain
from selling or otherwise transferring any shares of Parent Common Stock held by such stockholders after the consummation of the Merger for a period commencing on the Closing Date and ending
on the date that is 180 days after the Closing Date; and

NOW,
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound
hereby, the parties hereto agree as follows:

Article 1.  The Merger

Section 1.1    The Merger.At the Effective Time and upon the terms and subject to satisfaction or waiver
of the conditions set forth in this Agreement, and in accordance with the DGCL,
Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").

Section 1.2    Effective Time.As soon as practicable after the satisfaction or, if permissible,
waiver of the conditions set forth in Article 6, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance
with the relevant provisions of the DGCL (the date and time of such filing, or if another date and time is specified in such filing, such specified date and time, being the "Effective Time").

Section 1.3    Effect of the Merger.At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing,
at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 1.4    Certificate of Incorporation; By-laws.At the Effective Time, the Certificate of
Incorporation and the By-laws of the Surviving Corporation shall automatically, and without further action,
be amended as necessary to read the same as the Certificate of Incorporation and By-laws of Merger Sub.

Section 1.5    Directors and Officers.Unless otherwise designated by Parent, the directors of the
Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. Unless otherwise designated by Parent, the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation.

Section 1.6    Tax Consequences.It is intended by the parties hereto that the Merger qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. The parties hereto
adopt this Agreement as a "plan of reorganization" within the meaning of Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).

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Article 2.  Conversion of Securities; Exchange of Certificates

Section 2.1    Conversion of Securities.



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Section 2.2    Exchange of Certificates.



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Section 2.3    Stock Transfer Books.At the Effective Time, the stock transfer books of the Company
shall be closed, and thereafter there shall be no further registration of transfers of shares of
Company Capital Stock theretofore outstanding on the records of the Company. From and after the Effective Time, the holders of certificates representing shares of Company Capital Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Capital Stock except as otherwise provided herein or by Law.

Section 2.4    Company Options, Warrants and Rights.Prior to the Effective Time, the Company shall
terminate all unexercised Company Stock Options and warrants to purchase shares of Company Capital Stock and all
other rights to acquire or receive any equity securities of the Company (whether or not exercisable), in each case that are outstanding immediately prior to the Effective Time without the payment of
consideration to the holders thereof.

Section 2.5    Dissenters' Rights.Shares of Company Capital Stock that have not been voted for
approval of this Agreement or consented thereto in writing and with respect to which a demand and
appraisal have been properly made in accordance with the DGCL ("Dissenting Shares") will not be converted into the right to receive the shares of Parent Common Stock otherwise owed with respect to
such shares of Company Capital Stock at or after the Effective Time, but will be converted into the right to receive from the Surviving Corporation such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to the laws of the State of Delaware. If a holder of Dissenting Shares (a "Dissenting Stockholder") withdraws his or her demand for such payment and
appraisal or become ineligible for such payment and appraisal, then, as of the Effective Time or the occurrence of such event of withdrawal or ineligibility, whichever last occurs, such holder's
Dissenting Shares will cease to be Dissenting Shares and will be converted into the right to receive, and will be exchangeable for, the shares of Parent Common Stock in accordance with this Agreement.
The Company will give Parent prompt notice of any demand received by the Company from a Dissenting Stockholder for appraisal of shares of Company Capital Stock, and Parent shall have the right to
participate in all negotiations and proceedings with respect to such demand. The Company agrees that, except with the prior written consent of Parent, or as required under the DGCL, it will not
voluntarily make any payment with respect to, or settle or offer or agree to settle, any such demand for appraisal. Each Dissenting Stockholder who, pursuant to the provisions of the DGCL, becomes
entitled to payment of the value of the Dissenting Shares will receive payment therefor but only after the value therefor has been agreed upon or finally determined pursuant to such provisions. Any
portion of the shares of Parent Common Stock that would otherwise have been owed with respect to Dissenting Shares if such shares of Company Capital stock were not Dissenting Shares will be retained
by Parent.

Article 3.  Representations and Warranties of the Company

The Company represents and warrants to Parent and Merger Sub that, except as set forth in the Disclosure Letter furnished by Company to Parent simultaneously with
the execution hereof (the "Company Disclosure Letter"), the statements contained in this Article 3 are true, complete and correct as of the date of the Initial Merger Agreement, except to the
extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties are true, complete and correct as of such date).

Section 3.1    Organization and Good Standing.The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, operate and lease its properties and assets and to conduct its business as it is now being conducted. The Company is duly qualified or licensed to do business as a
corporation, and is in good standing as a corporation, in every jurisdiction in which its ownership of property or the character of its business requires such qualification, except for those
jurisdictions in which the failure to be so qualified or in good standing, individually or in the aggregate, has not had

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and
would not reasonably be expected to have, a Company Material Adverse Effect. Section 3.1 of the Company Disclosure Letter sets forth a true, complete and correct list of all foreign
jurisdictions in which the Company is so qualified or licensed and in good standing.

As
used herein, the term "Company Material Adverse Effect" shall mean: (a) any event, circumstance or occurrence that has resulted in, or would reasonably be expected to result
in, a material adverse effect on the business, results of operations, tangible assets, and financial condition of the Company and its Subsidiaries, taken as a whole; or (b) any event,
circumstance or occurrence that prevents or materially delays, or would reasonably be expected to prevent or materially delay, the ability of the Company to consummate the Merger; provided,however, that in no event shall any of the following be a Company Material Adverse Effect, or
be taken into account in the determination of whether a Company Material Adverse Effect has occurred: (A) any change resulting from conditions affecting any of the industries in which the
Company operates or from changes in general business or economic conditions; (B) any change resulting from the announcement or pendency of the transactions contemplated by this Agreement;
(C) any change resulting from the compliance by the Company with the terms of, or the taking of any action by the Company contemplated or permitted by, this Agreement; or (D) the receipt
by the Company of notice of cancellation or non-renewal from any customer of the Company except to the extent that such customer accounted for more than the Trigger Amount of Company
revenues for the twelve months ended September 30, 2005 (in each case determined in accordance with GAAP, except that no customer of the Company shall be deemed to have cancelled or not renewed
if such customer's business is placed with Parent). The "Trigger Amount" shall equal the sum of $3.75 million plus (y) a mutually agreed upon reasonable estimate of the annual revenues
expected to be generated under any new Company customer accounts won after September 30, 2005 and (z) a mutually agreed upon reasonable estimate of the annual revenues expected to be
generated as the result of any expansions under Company customer accounts existing as of September 30, 2005.

Section 3.2    Corporate Records.Copies of the certificate of incorporation (the "Company
Charter") and of the by-laws of the Company heretofore delivered to Parent are true, complete
and correct copies of such instruments as amended. The Company Charter and by-laws of the Company are in full force and effect. The Company is not in violation of any material provision of
the Company Charter or its by-laws. The books and records, minute books, stock record books and other similar records of the Company, all of which have been delivered to Parent, are true,
complete and correct in all material respects.

Section 3.3    Corporate Power and Authority.The Company has the requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements. Subject to the Company Stockholder
Approval, the execution and delivery by the Company of this Agreement and any Ancillary Agreement to which the Company is a party, the performance by it of its obligations hereunder and thereunder and
the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate actions on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes, and each Ancillary Agreement to which the Company is a party when executed will constitute, the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect
relating to creditors' rights generally and subject to general principles of equity. The Board of Directors of the Company (the "Company Board") has unanimously approved this Agreement and each
Ancillary Agreement to which the Company is a party, declared advisable the transactions contemplated hereby and thereby and has directed that this Agreement and the transactions contemplated hereby
be submitted to the Company's Stockholders for approval.

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Section 3.4    Capitalization.



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Section 3.5    Subsidiaries.



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Section 3.6    No Violation.Neither the execution and delivery of this Agreement by the Company
and of each Ancillary Agreement to which it is a party, the performance by the Company of its
obligations hereunder and thereunder, nor the consummation by the Company of the transactions contemplated hereby and thereby, will (a) assuming receipt of the Company Stockholder Approval,
contravene any provision of the certificate of incorporation or by-laws of the Company or any organizational documents or agreements of any of its Subsidiaries, (b) assuming
compliance with the matters referred to in Section 3.7, violate any Law or judgment applicable to the Company or any of its Subsidiaries, (c) result in the creation or imposition of any
Lien (other than Permitted Liens) on any of the property held by the Company or any of its Subsidiaries, or (d) assuming compliance with the matters referred to in Section 3.7, require
any consent or other action by any Person under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to any right of
termination, change of control rights, cancellation, modification, enhancement of rights of third parties, revocation of grant of rights or assets, placement into or release from escrow of any assets
of the Company or any of its Subsidiaries or acceleration of any right or obligation of the Company or any of its Subsidiaries or a loss of any benefit to which the Company or any of its Subsidiaries
is entitled under any note, bond, mortgage, indenture, deed of trust, license, contract, lease, permit, franchise or other instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company any of its Subsidiaries or their respective properties or assets are bound or affected (including under any outstanding debt), except for as would not, individually or in
the aggregate, be reasonably expected to have a Company Material Adverse Effect or any notice or other action the absence of which, individually or in the aggregate, would not be reasonably expected
to have a Company Material Adverse Effect. As used herein, "Permitted Liens" means with respect to any Person (A) such imperfections of title, easements, encumbrances or restrictions which do
not materially impair the current use of such Person's or any of its Subsidiary's assets, (B) materialmen's, mechanics', carriers', workmen's, warehousemen's, repairmen's and other like Liens
arising in the ordinary course of business, or deposits to obtain the release of such Liens, (C) Liens for Taxes not yet due and payable, or being contested in good faith, and
(D) purchase money Liens incurred in the ordinary course of business.

Section 3.7    Approvals.No consent, waiver, approval, order, authorization or declaration of,
filing or registration with, or notice to, any Governmental Authority or other Person is
required to be made, obtained or given by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery by the Company of this Agreement, the performance by
the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated hereby, except for (a) such consents, waivers, approvals, orders, authorizations,
declarations, filings, registrations and notices, which if not obtained or made would not reasonably be expected to have have a Company Material Adverse Effect, (b) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and (c) the Company Stockholder Approval.

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Section 3.8    Financial Statements; No Undisclosed Liabilities.



Section 3.9    Ordinary Course Operations.Since the Balance Sheet Date, the Company has conducted
its business in the ordinary course, consistent with past practice, and the Company has not taken any of
the actions described in subparagraphs (a) through (v) of Section 5.1 except as permitted pursuant to Section 5.1.

Section 3.10    Leases of Personal and Real Property; Owned Real Property; Material Contracts; No Default.



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Section 3.11    Intellectual Property Matters.



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Section 3.12    Litigation.Except with respect to matters relating to routine employment or the
provision of goods and services in the ordinary course of business where the amounts at issue
do not exceed $50,000 individually, (a) there is no Action pending or, to the Knowledge of the Company, threatened in writing against the Company, any of its Subsidiaries, or their respective
properties (tangible or intangible) or their respective Directors or corporate officers in their respective capacities as such or for which the Company or any Subsidiary is obligated to indemnify a
third party, (b) there is no investigation or other proceeding pending or, to the Knowledge of the Company, threatened in writing, against the Company, its Subsidiaries, their properties
(tangible or intangible) or their officers or Directors in their respective capacities as such or for which the Company or any Subsidiary is obligated to indemnify a third party, and (c) no
Governmental Authority has provided the Company with written notice challenging or questioning in any material respect the legal right of the Company or any Subsidiary to conduct its operations as
conducted at that time or as presently conducted. Neither the Company nor any of its Subsidiaries is subject to (i) any outstanding judgment, order, arbitration ruling or other finding or
decree of any Governmental Authority (or arbitral body) or (ii) any settlement or similar agreement or written arrangement with ongoing obligations relating to a dispute with any third party,
in each case other than matters relating to routine employment and the provisions of goods and services in the ordinary course of business where the amounts at issue do not exceed $100,000
individually or $1,000,000 in the aggregate.

Section 3.13    Compliance with Laws; Permits.



Section 3.14    Taxes



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Section 3.15    Insurance.Section 3.15 of the Company Disclosure Letter sets forth a true,
complete and correct list of all material insurance policies or binders maintained by or
for the benefit of the Company, its Subsidiaries and its Directors, officers, employees or agents. The Company has delivered or made available to the Parent true, complete and correct copies of such
policies and binders. (a) All such policies or binders are in full force and effect and no premiums due and payable thereon are delinquent, (b) there are no pending material claims
against such insurance policies or binders by the Company or any Subsidiary as to which the insurers have denied Liability, (c) the Company and its Subsidiaries have complied in all material
respects with the provisions of such policies and (d) there exist no material claims under such insurance policies or binders that have not been properly and timely submitted by the Company or
any Subsidiary to its insurers. The insurance coverage provided by such policies or insurance will not terminate or lapse by reason of the transactions contemplated by this Agreement and, following
the Closing Date, the Company and its Subsidiaries will continue to be covered under such policies for events occurring prior to the Closing Date. No such policy provides for or is subject to any
currently enforceable retroactive rate or premium adjustment or loss sharing arrangement arising wholly or partially out of events arising prior to the date of the Initial Merger Agreement.
Section 3.15 of the Company Disclosure Letter sets forth a list of all claims (other than insurance claims made by or for the benefit of employees) in excess of $25,000 individually submitted
to insurers during the past 18-month period ending September 30, 2005.

Section 3.16    Employee Benefit Plans.



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Section 3.17    Employees



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Section 3.18    Personal Property; Assets.Section 3.18 of the Company Disclosure Letter sets
forth a true, complete and correct list of all equipment and fixtures having a book value in excess of
$25,000 (a) purchased by the Company and its Subsidiaries since the Balance Sheet Date, or (b) owned by third Persons, including any customers of the Company and its Subsidiaries, and
used by the Company and its Subsidiaries in their business other than pursuant to Personal Property Leases. The Company and its Subsidiaries have good and marketable title to, or a valid leasehold
interest in or right to use by license or otherwise, the properties and assets used by it on or immediately prior to the date of the Initial Merger Agreement (collectively, the "Assets"), free and
clear of all Liens, except for Permitted Liens. The Assets include or will include as of the Closing Date, without limitation, all personal property, both tangible and intangible (including all
Company Owned Intellectual Property and all Intellectual Property used by the Company and its Subsidiaries pursuant to License Agreements), necessary to conduct the business of the Company and its
Subsidiaries in all material respects as it is now being conducted.

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Section 3.19    Environmental Matters.



Section 3.20    Fees.There is no investment banker, broker, finder, intermediary or other Person
(other than lawyers and accountants) entitled to any brokerage, finder's or any other
fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.

Section 3.21    Related-Party Transactions.Other than advances to employees in the ordinary course
for travel and similar reimbursable expenses consistent with Company policy, no Key Employee, officer or
Director of the Company or any Subsidiary of the Company or member of his or her immediate family is currently indebted to the Company or any Subsidiary of the Company. To the Knowledge of the
Company, as of the date of the Initial Merger Agreement none of such Persons has any direct or indirect ownership interest in any firm or corporation with which the Company or any Subsidiary of the
Company is affiliated or with which the Company or any Subsidiary of the Company has a business relationship, or any firm or corporation that competes with the Company or any Subsidiary of the
Company. No Key Employee, officer or Director of the Company or any Subsidiary and no member of the immediate family of any Key Employee, officer or Director of the Company or any Subsidiary of the
Company is directly or indirectly interested in any Material Contract with the Company or any Subsidiary of the Company or has or claims to have any interest in the Intellectual Property of the
Company and its Subsidiaries.

Section 3.22    Acquisitions.Section 3.22 of the Company Disclosure Letter sets forth each
acquisition, by means of asset purchase, merger, consolidation or other similar transaction,
of a Person or business by any of the Company or its Subsidiaries (each, an "Acquisition") since January 1, 2002.

Section 3.23    Proxy Statement and Registration Statement.The Proxy Statement and Registration
Statement, and any amendments or supplements thereto, will not, at (a) the time the Registration Statement is declared
effective, (b) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Parent, (c) the time of the Parent Stockholders'
Meeting, and (d) the Effective Time, contain any untrue statement of a material fact based upon information furnished to the Parent by the Company or omit to state any material fact regarding
the Company required to be stated therein or necessary in order to make the statements

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made
therein, in light of the circumstances under which they were made, not misleading due to the Company's failure to disclose such material fact to Parent.

Section 3.24    Tax Treatment.None of the Company nor any of its Subsidiaries has taken or agreed
to take any action that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Neither the Company, nor any of its Subsidiaries is aware of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

Section 3.25    Vote Required.The Company Stockholder Approval is the only vote of the holders of
any class or series of capital stock or other equity interests of the Company necessary to
approve the Merger.

Section 3.26    Opinion of Financial Advisor.The Company has received the opinion of Revolution
Partners, dated December 14, 2007, to the effect that, as of such date, the Merger Consideration is fair
from a financial point of view to the stockholders of the Company.

Section 3.27    Disclosure.No representation or warranty by the Company contained in this
Agreement, and no statement of the Company contained in the Company Disclosure Letter or any other
document, certificate or other instrument delivered or to be delivered by or on behalf of the Company hereunder, contains or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein, not misleading.

Section 3.28    Reserved

Section 3.29    Releases.The Company has received the Company Releases and has provided executed
copies thereof to Parent. The Company Releases are in full force and effect and are legal,
valid, binding and enforceable by the Company and, as of and after the Effective Time, by Parent, against the signatories thereof.

Article 4.  Representations and Warranties of Parent and Merger Sub

Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that, except as set forth in the Disclosure Letter furnished by Parent to
the Company simultaneously with the execution hereof (the "Parent Disclosure Letter"), the statements contained in this Article 4 are true, complete and correct as of the date of the Initial
Merger Agreement, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties are true, complete and
correct as of such date).

Section 4.1    Organization and Good Standing.Each of Parent and Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, operate and lease its properties and assets and to conduct its business as it is now being conducted. Each of Parent and Merger Sub is duly qualified or
licensed to do business as a corporation, and is in good standing as a corporation, in every jurisdiction in which its ownership of property or the character of its business requires such
qualification, except for those jurisdictions in which the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have, a
Parent Material Adverse Effect. Section 4.1 of the Parent Disclosure Letter sets forth a true, complete and correct list of all foreign jurisdictions in which each of Parent and Merger Sub is
so qualified or licensed and in good standing.

As
used herein, the term "Parent Material Adverse Effect" shall mean: (a) any event, circumstance or occurrence that has resulted in, or would reasonably be expected to result in,
a material adverse

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effect
on the business, results of operations, tangible assets, and financial condition of Parent and its Subsidiaries, taken as a whole; or (b) any event, circumstance or occurrence that
prevents or materially delays, or would reasonably be expected to prevent or materially delay, the ability of Parent to consummate the Merger;provided, however, that in no event shall any of the following be a Parent Material Adverse Effect, or be taken into account in the determination of whether a
Parent Material Adverse Effect has occurred: (A) any change resulting from conditions affecting any of the industries in which Parent operates or from changes in general business or economic
conditions; (B) any change resulting from the announcement or pendency of the transactions contemplated by this Agreement; (C) any change resulting from the compliance by Parent with the
terms of, or the taking of any action by Parent contemplated or permitted by, this Agreement; or (D) the receipt by Parent of notice of cancellation or non-renewal from any Parent
customer except to the extent that such customer accounted for more than the Trigger Amount of Parent revenues for the twelve months ended September 30, 2005 (in each case determined in
accordance with GAAP, except that no Parent customer shall be deemed to have cancelled or not renewed if such customer's business is placed with the Company). The "Trigger Amount" shall equal the sum
of $7 million plus (y) a mutually agreed upon reasonable estimate of the annual revenues expected to be generated under any new Parent customer accounts won after September 30,
2005 and (z) a mutually agreed upon reasonable estimate of the annual revenues expected to be generated as the result of any expansions under Parent customer accounts existing as of
September 30, 2005.

Section 4.2    Certificate of Incorporation and By-laws; Corporate Books and Records.The copies of
Parent's Restated Certificate of Incorporation, as amended (the "Parent Certificate") and Restated By-laws, as amended (the "Parent
By-laws") that are listed as exhibits to Parent's Form 10-K for the year ended December 31, 2004 are complete and correct copies thereof as in effect on the date
of the Initial Merger Agreement, and as of the date of the Initial Merger Agreement, there has been no amendment thereto since such date. Parent is not in violation of any of the provisions of the
Parent Certificate or Parent By-laws. The certificate of incorporation and by-laws of Merger Sub are in full force and effect. Merger Sub is not in violation of any material
provision of its certificate of incorporation or by-laws.

Section 4.3    Corporate Power and Authority.Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is
party. Subject to obtaining the Parent Stockholder Approval, the execution and delivery of this Agreement and each Ancillary Agreement to which it is a party by each of Parent and Merger Sub, the
performance of its respective obligations hereunder and thereunder and the consummation by Parent and Merger Sub, as applicable, of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action (including approval by Parent as sole stockholder of Merger Sub), and no other corporate proceedings on the part of Parent and Merger Sub and no
other stockholder votes are necessary to authorize this Agreement or any such Ancillary Agreement or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes, and each Ancillary Agreement to which Parent or Merger Sub is a party when executed will constitute, the legal, valid and binding
obligations of Parent and Merger Sub, as applicable, enforceable against it in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity. The Parent Board has unanimously approved this Agreement and each Ancillary
Agreement to which Parent is a party, declared advisable the transactions contemplated hereby and thereby and has directed that the Parent Stockholder Meeting be called to obtain the Parent
Stockholder Approval.

Section 4.4    Capitalization.The authorized capital stock of Parent consists of 200,000,000 shares
of Parent Common Stock and 15,000,000 shares of Parent Preferred Stock. As of
(a) November 30, 2005, 74,219,397 shares of Parent Common Stock (other than treasury shares) were issued and

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outstanding,
all of which shares of Parent Common Stock were, and all shares of Parent Common Stock issued and outstanding as of the date of the Initial Merger Agreement are, duly authorized, validly
issued and fully paid, nonassessable and free of preemptive rights, and have been issued in compliance with applicable Laws and all requirements set forth in contracts, (b) as of the date of
the Initial Merger Agreement, no shares of Parent Common Stock were held in the treasury of Parent or any of its Subsidiaries, (c) as of the date of the Initial Merger Agreement, 3,261,001
shares of Parent Common Stock were issuable (and such number was reserved for issuance) upon exercise of options to purchase Parent Common Stock ("Parent Options") outstanding, and (d) as of
the date of the Initial Merger Agreement, no shares of Parent Preferred Stock were issued and outstanding. As of the date of the Initial Merger Agreement, except for (i) Parent Options to
purchase not more than 3,261,001 shares of Parent Common Stock pursuant to Parent Stock Option Plans outstanding and unexercised, and (ii) warrants to purchase 7,075,808 shares of Parent Common
Stock, there were no options, warrants or other rights to purchase capital stock of Parent, or securities convertible into or exchangeable for such capital stock or obligating Parent to issue or sell
any shares of capital stock, or securities convertible into or exchangeable for such capital stock of Parent. There are no Parent Options other than those issued pursuant to Parent Stock Option Plans.
True, correct, and complete copies of the plans pursuant to which Parent Options, shares of Parent Restricted Stock and warrants to purchase shares of capital stock of Parent have been issued have
been provided or made available to the Company. The shares of Parent Common Stock to be issued in connection with the Merger, when issued as contemplated herein, will be duly authorized, validly
issued, fully paid and nonassessable and will not be issued in violation of any applicable Laws or requirements set forth in applicable contracts.

Section 4.5    Subsidiaries.



Section 4.6    No Conflict; Required Filings and Consents.



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Section 4.7    SEC Filings; Financial Statements.



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Section 4.8    Leases of Personal and Real Property; Owned Real Property; Scheduled Contracts; No Default.



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Section 4.9    Ordinary Course Operations.Except as set forth in the Parent SEC Filings filed
through the date of the Initial Merger Agreement, since December 31, 2004, Parent has conducted its
business in the ordinary course, consistent with past practice, and Parent has not taken any of the actions set forth in subparagraphs (a) through (v) of Section 5.2 except as
permitted pursuant to Section 5.2.

Section 4.10    Litigation.Except with respect to matters relating to routine employment or the
provision of goods and services in the ordinary course of business where the amounts at issue
do not exceed $50,000 individually, (a) there is no Action pending or, to the Knowledge of Parent, threatened in writing against Parent, any of its Subsidiaries, or their respective properties
(tangible or intangible) or their respective Directors or corporate officers in their respective capacities as such or for which Parent or any Subsidiary is obligated to indemnify a third party,
(b) there is no investigation or other proceeding pending or, to the Knowledge of Parent, threatened in writing, against Parent, its Subsidiaries, their properties (tangible or intangible) or
their officers or Directors in their respective capacities as such or for which Parent or any Subsidiary is obligated to indemnify a third party, and

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(c) no
Governmental Authority has provided Parent with written notice challenging or questioning in any material respect the legal right of Parent or any Subsidiary to conduct its operations as
conducted at that time or as presently conducted. Neither Parent nor any of its Subsidiaries is subject to (i) any outstanding judgment, order, arbitration ruling or other finding or decree of
any Governmental Authority (or arbitral body) or (ii) any settlement or similar agreement or written arrangement with ongoing obligations relating to a dispute with any third party, in each
case other than matters relating to routine employment and the provisions of goods and services in the ordinary course of business where the amounts at issue do not exceed $100,000 individually or
$1,000,000 in the aggregate.

Section 4.11    Compliance with Laws; Permits.



Section 4.12    Disclosure Documents.The Proxy Statement, the Registration Statement, and any
Other Filings, and any amendments or supplements thereto, do not, and will not, at (a) the time
the Registration Statement is declared effective, (b) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of Parent, (c) the
time of the Parent Stockholders' Meeting and (d) the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The representations and warranties contained in this
Section 4.10 will not apply to statements or omissions included in the Proxy Statement or the Registration Statement, or any Other Filings based upon information furnished in writing to the
Parent or Merger Sub by the Company specifically for use therein.

Section 4.13    Intellectual Property Matters.



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Section 4.14    Tax TreatmentNone of Parent or any Subsidiary of Parent has taken or has agreed to
take any action that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Neither Parent nor any of its Subsidiaries is aware of any fact, agreement, plan or other circumstance that is reasonably likely
to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

Section 4.15    Taxes.



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Section 4.16    Insurance.(a) All material insurance policies or binders maintained by or for
the benefit of Parent, its Subsidiaries and its Directors, officers, employees or
agents are in full force and effect and no premiums due and payable thereon are delinquent, (b) there are no pending material claims against such insurance policies or binders by Parent or any
Subsidiary as to which the insurers have denied Liability, (c) Parent and its Subsidiaries have complied in all material respects with the provisions of such policies and (d) there exist
no material claims under such insurance policies or binders that have not been properly and timely submitted by Parent or any Subsidiary to its insurers. The insurance coverage provided by such
policies or insurance will not terminate or lapse by reason of the transactions contemplated by this Agreement and, following the Closing Date, Parent and its Subsidiaries will continue to be covered
under such policies for events occurring prior to the Closing Date. No such policy provides for or is subject to any currently enforceable retroactive rate or premium adjustment or loss sharing
arrangement arising wholly or partially out of events arising prior to the date of the Initial Merger Agreement. Section 4.15 of the Parent Disclosure Letter sets forth a list of all claims
(other than insurance claims made by or for the benefit of employees) in excess of $25,000 individually submitted to insurers during the past 18-month period ending September 30,
2005.

Section 4.17    Ownership of Merger Sub; No Prior Activities.



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Section 4.18    Employee Benefit Plans.



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Section 4.19    Employees.



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Section 4.20    Fees.Except for such advisory fees as will be paid to John Harris and such fees to
be paid to Southwest Securities, Inc. in connection with the Parent Fairness
Opinion, no broker, finder or investment banker, intermediary or other Person (other than lawyers and accountants) is entitled to any brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or any of its Subsidiaries.

Section 4.21    Personal Property; Assets.Section 4.21 of the Parent Disclosure Letter sets
forth a true, complete and correct list of all equipment and fixtures having a book value in excess of
$30,000

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(a) purchased
by Parent and its Subsidiaries since September 30, 2005, or (b) owned by third Persons, including any customers of Parent and its Subsidiaries, and used by Parent
and its Subsidiaries in their business other than pursuant to Parent Personal Property Leases. Parent and its Subsidiaries have good and marketable title to, or a valid leasehold interest in or right
to use by license or otherwise, the properties and assets used by it on or immediately prior to the date of the Initial Merger Agreement (collectively, the "Parent Assets"), free and clear of all
Liens, except for Permitted Liens. The Parent Assets include or will include as of the Closing Date, without limitation, all personal property, both tangible and intangible (including all Parent Owned
Intellectual Property and all Intellectual Property used by Parent and its Subsidiaries pursuant to their License Agreements), necessary to conduct the business of Parent and its Subsidiaries in all
material respects as it is now being conducted.

Section 4.22    Environmental Matters.



Section 4.23    Vote Required.The Parent Stockholder Approval is the only vote of the holders of
any class or series of capital stock or other equity interests of Parent necessary to approve
the Merger.

Section 4.24    Disclosure.No representation or warranty by Parent contained in this Agreement, and
no statement of Parent contained in the Parent Disclosure Letter or any other document,
certificate or other instrument delivered or to be delivered by or on behalf of Parent hereunder, contains or will contain any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.

Section 4.25    Opinion of Financial Advisor.Parent has received the opinion of Southwest
Securities, Inc., dated the date of the Initial Merger Agreement, to the effect that, as of such date, the
Merger is fair from a financial point of view to the Parent Stockholders.

Section 4.26    Related-Party Transactions.Other than advances to employees in the ordinary course
for travel and similar reimbursable expenses consistent with Parent policy, no Key Employee, officer or
Director of Parent or any Subsidiary of Parent or member of his or her immediate family is currently indebted to Parent or any Subsidiary of the Company. To the Knowledge of Parent, as of the date of

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the
Initial Merger Agreement none of such Persons has any direct or indirect ownership interest in any firm or corporation with which Parent or any Subsidiary of Parent is affiliated or with which the
Company or any Subsidiary of Parent has a business relationship, or any firm or corporation that competes with Parent or any Subsidiary of Parent. No Key Employee, officer or Director of Parent or any
Subsidiary and no member of the immediate family of any Key Employee, officer or Director of Parent or any Subsidiary of Parent is directly or indirectly interested in any Scheduled Contract with
Parent or any Subsidiary of Parent or has or claims to have any interest in the Intellectual Property of Parent and its Subsidiaries.

Article 5.  Covenants

Section 5.1    Conduct of Business by the Company Pending the Closing.The Company agrees that, between
the date of the Initial Merger Agreement and the earlier of the termination of this Agreement and the Effective Time (the
"Interim Period"), except as set forth in Section 5.1 of the Company Disclosure Letter or as specifically permitted or required by any other provision of this Agreement, unless Parent shall
otherwise agree in writing, the Company will, and will cause each of its Subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice and use
commercially reasonable efforts to keep available the services of the current officers and Key Employees of the Company and each of its Subsidiaries and to preserve the current relationships of the
Company and each of its Subsidiaries with such of the customers, suppliers and other Persons with which the Company or any of its Subsidiaries has significant business relations as is reasonably
necessary to preserve substantially intact its business organization. Without limiting the foregoing, and as an extension thereof, except as set forth in Section 5.1 of the Company Disclosure
Letter or as specifically permitted or required by any other provision of this Agreement, the Company shall not (unless required by applicable Law), and shall not permit any Subsidiary of the Company
to, during the Interim Period, directly or indirectly, do, or agree to do, any of the following without the prior written consent of Parent:



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Section 5.2    Conduct of Business by Parent Pending the Closing.Parent agrees that, during the
Interim Period, except as set forth in Section 5.2 of the Parent Disclosure Letter or as specifically permitted or required
by any other provision of this Agreement, unless Company shall otherwise agree in writing, Parent will, and will cause each of its Subsidiaries to, (a) conduct its operations only in the
ordinary and usual course of business consistent with past practice and (b) use commercially reasonable efforts to keep available the services of the current officers and Key Employees of
Parent and to preserve the current relationships of Parent and each of its Subsidiaries with such of the customers, suppliers and other persons with which Parent or any of its Subsidiaries has
significant business relations as is reasonably necessary to preserve substantially intact its business organization. Except as specifically permitted or required by any other provision of this
Agreement, Parent shall not (unless required by applicable Law or any NASDAQ regulations applicable to the Parent), between the date of the Initial Merger Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following, without the prior written consent of the Company:



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Section 5.3    Cooperation.The Company and Parent shall coordinate and cooperate in connection
with (a) the preparation of the Registration Statement, the Proxy Statement and any
Other Filings;

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(b) determining
whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from
parties to any Company Material Contracts, in connection with the consummation of the Merger; and (c) seeking any such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the Registration Statement, the Proxy Statement or any Other Filings and timely seeking to obtain any such actions, consents, approvals
or waivers and (d) seeking all necessary consents, waivers or approvals and taking such action as may be reasonably required for continued quotation of Parent Common Stock on NASDAQ for at
least 180 days after the Effective Time.

Section 5.4    Registration Statement; Proxy Statement.



Section 5.5    Stockholders' Meetings.



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Section 5.6    Access to Company Information; Confidentiality.



Section 5.7    Access to Parent Information; Confidentiality



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Section 5.8    No Solicitation of Transactions.



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Section 5.9    Appropriate Action; Consents; Filings.



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Section 5.10    Reserved.

Section 5.11    Certain Notices.From and after the date of the Initial Merger Agreement until the
Effective Time, each party hereto shall promptly notify the other party hereto of (a) the
occurrence, or non-occurrence, of any event that would reasonably be expected to cause any condition to the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement or any Ancillary Agreement not to be satisfied, or (b) the failure of the Company or Parent, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it pursuant to this Agreement or any Ancillary Agreement that would reasonably be expected to result in any condition to the obligations of any party
to effect the Merger and the other transactions contemplated by this Agreement or any Ancillary Agreement not to be satisfied;provided, however, that the
delivery of any notice pursuant to this Section 5.11 shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of

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the
Initial Merger Agreement or otherwise limit or affect the remedies available hereunder to the party receiving such notice.

Section 5.12    Public Announcements.Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with respect to the Merger and
shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law or any listing agreement with NASDAQ.

Section 5.13    NASDAQ Listing.Parent shall promptly prepare and submit to NASDAQ and any other
applicable stock exchange a listing application covering the shares of Parent Common Stock to be
issued in the Merger and shall use its reasonable best efforts to cause such shares to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the Effective Time.

Section 5.14    Employee Benefit Matters.With respect to any Parent Benefit Plan in which any
director, officer or employee of the Company or any of its Subsidiaries (the "Company Employees") may be
eligible to participate after the Effective Time, Parent shall, or shall cause the Surviving Corporation to, recognize, to the extent recognized under the applicable Employee Plan, the length of
service of the Company Employees with the Company or any of its Subsidiaries, as the case may be, for purposes of vesting, eligibility and accrual of benefits, in such Parent Benefit Plans; provided,however, that no service shall be recognized to the extent that such recognition would result
in a duplication of benefits.

Section 5.15    Indemnification of Parent Directors and Officers.



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Section 5.16    Indemnification of Company Directors and Officers.



Section 5.17    Tax Matters.Each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any actions or cause any actions to be taken
which could reasonably be expected to prevent the Merger from qualifying, as a reorganization within the meaning of Section 368(a) of the Code. Parent and the Company shall each cause all Tax
Returns relating to the Merger to be filed on the basis of treating the Merger as a reorganization under section 368(a) of the Code. In connection with the filing of the Registration Statement
and the Proxy Statement and immediately prior to the Effective Time, Parent, Merger Sub and the Company shall execute and deliver to Latham & Watkins, LLP, counsel to Parent, and to Nutter
McClennen & Fish, LLP, counsel to the Company, tax representation letters in customary form and upon which Latham & Watkins, LLP

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and
Nutter McClennen & Fish, LLP will rely to determine and describe, including expertising, the tax consequences of the Merger in the Registration Statement and/or Proxy Statement.

Section 5.18    Affiliate Letters.The Company shall, within ten business days of the date of the
Initial Merger Agreement, deliver to Parent a list of names and addresses of those Persons, that to
the Knowledge of the Company, are or may be deemed to be as of the time of the Company Stockholders' Meeting "affiliates" of the Company within the meaning of Rule 145 under the Securities Act
and who own Company Capital Stock. There shall be added to such list the names and addresses of any other Person subsequently identified by either Parent or the Company, as the case may be (unless, in
the case of Parent, an opinion of outside counsel to the Company reasonably acceptable to Parent is provided to Parent that such Person is not an affiliate), as a Person who may be deemed to be such
an affiliate;provided,however, that no such Person identified by Parent or the Company, as the case
may be, shall remain on such list of affiliates if Parent or the Company, as the case may be, shall receive from the other party, on or before the date of the Company Stockholders' Meeting, an opinion
of outside counsel reasonably satisfactory to Parent to the effect that such Person is not such an affiliate. The Company shall use reasonable best efforts to deliver or cause to be delivered to the
other party, prior to the date of the Company Stockholders' Meeting, from each such affiliate identified in the foregoing list a letter dated as of the Company Stockholders' Meeting in a form
reasonably acceptable to Parent (collectively, the "Affiliate Letter"). Parent shall not be required to maintain the effectiveness of the Registration Statement or any other registration statement
under the Securities Act for the purposes of resale of Parent Common Stock by such affiliates received in the Merger except to the extent provided in Section 5.4.3.

Section 5.19    Delivery of Financial Statements.



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Section 5.20    Transitional Matters.Each of Parent and the Company shall use their reasonable
best efforts to effectuate the following transitional matters.



Section 5.21    FIRPTA Certification.Prior to the Closing Date, the Company shall deliver to
Parent an executed affidavit from the Company, also delivered to the Internal Revenue Service, that the
Company Common Stock is not a "U.S. real property interest" in accordance with the Treasury Regulations issued under Sections 897 and 1445 of the Code. If Parent does not receive the documents
described above on or before the Closing Date, Parent shall be permitted to withhold from the consideration otherwise payable pursuant to this Agreement any required withholding tax under
Section 1445 of the Code.

Section 5.22    Parent Financing.Prior to the Closing Date, Parent and the Company shall work
together to arrange debt or equity financing on terms and conditions acceptable to Parent (which
terms and conditions shall be subject to the approval of the Company, which shall not be unreasonably withheld), sufficient to (i) permit the full repayment or other extinguishment of the
Combined Indebtedness and (ii) provide Parent with not less than $5 million of additional cash working capital on the Closing Date (such financing, the "Parent Financing").

Section 5.23    Amendment of Parent Bylaws.No later than the first anniversary of the Closing Date,
 the Parent Board shall have taken such action as is reasonably necessary to amend the Bylaws of

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the
Parent to prohibit a single Person from simultaneously being Chairman of the Parent Board and Chief Executive Officer of the Parent.

Section 5.24    Amendment of Company Charter and Termination of Investor's Rights Agreement.At or
prior to the Effective Time, the Company Board and Company Stockholders shall have taken such action as is necessary to terminate the Company Investor's
Rights Agreement and to amend the Company Charter to the extent necessary to provide for the conversion of the Company Capital Stock into shares of the Parent Common Stock pursuant to the Per Share
Amounts contemplated hereby. Such amendment of the Company Charter shall be reasonably acceptable to Parent.

Section 5.25    Roland and Series F Releases.The Company shall use its reasonable best
efforts to obtain the Roland Release and the Series F Releases.

Article 6.  Closing Conditions

Section 6.1    Conditions to Obligations of Each Party Under This Agreement.The respective obligations of
each party to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law:



Section 6.2    Additional Conditions to Obligations of Parent and Merger Sub.The obligations of
Parent and Merger Sub to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:



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Section 6.3    Additional Conditions to Obligations of the Company.The obligation of the Company
to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:



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Article 7.
Termination, Amendment and Waiver

Section 7.1    Termination.This Agreement may be terminated, and the Merger contemplated hereby may be
abandoned, at any time prior to the Effective Time, by action taken or authorized by
the Board of Directors of the terminating party or parties:



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Section 7.2    Effect of Termination.



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Section 7.3    Amendment.This Agreement may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any time prior to the Effective
Time;provided,however, that, after approval of the Merger by the Company Stockholders or obtaining the
Parent Stockholder Approval, no amendment may be made without further stockholder approval, which, by Law or in accordance with the rules of any relevant stock exchange, requires further approval by
such stockholders. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

Section 7.4    Waiver.At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, and (c) waive compliance
by the other party with any of the agreements or conditions contained herein;provided,however, that
after any approval of the transactions contemplated by this Agreement by the stockholders of the Company or obtaining the Parent Stockholder Approval, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion thereof which, by Law or in accordance with the rules of any relevant stock exchange, requires further approval by the
Company Stockholders or the

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Parent
Stockholders. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

Section 7.5    Fees and Expenses.Subject to Section 7.2.1, Section 7.2.2 and
Section 7.2.3 hereof, all expenses incurred by the parties hereto shall be borne solely and
entirely by the party which has incurred the same;provided,however, that Parent shall pay the expenses
related to printing, filing and mailing the Registration Statement and the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Registration Statement and the
Proxy Statement.

Article 8.
General Provisions

Section 8.1    General Survival.The parties agree that, regardless of any investigation made by the
parties, the representations and warranties of the parties contained in this Agreement shall
survive the execution and delivery of this Agreement for a period beginning on the date of the Initial Merger Agreement and ending at the Effective Time. All of the covenants, agreements and
obligations of the parties contained in this Agreement or any other document, certificate, schedule or instrument delivered or executed in connection herewith shall survive (a) until fully
performed or fulfilled, unless non-compliance with such covenants, agreements or obligations is waived in writing by the party or parties entitled to such performance or (b) if not
fully performed or fulfilled, until the expiration of the relevant statute of limitations.

Section 8.2    Notices.Any notices or other communications required or permitted under, or
otherwise in connection with this Agreement, shall be in writing and shall be deemed to have
been duly given when delivered in person or upon confirmation of receipt when transmitted by facsimile transmission, or on receipt after dispatch by registered or certified mail, postage prepaid,
addressed, or on the next business day if transmitted by national overnight courier, in each case as follows:

If
to Parent or Merger Sub, addressed to it at:



with
a mandated copy to:



If
to the Company, addressed to it at:



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with
a mandated copy to:



Section 8.3    Definitions.The following terms, as used herein, shall have the following meanings:



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Section 8.4    Accounting Terms.All accounting terms not specifically defined in this Agreement
shall be construed in accordance with GAAP consistently applied.

Section 8.5    Certain Terms.The terms "hereof," "herein" and "hereunder" and terms of similar
import are references to this Agreement as a whole and not to any particular provision of this
Agreement. The term "including" as used in this Agreement is used to list items by way of example and shall not be deemed to constitute a limitation of any term or provision contained herein. As used
in this Agreement, the singular or plural number shall be deemed to include the other whenever the context so requires. Article, Section, clause and Schedule references contained in this Agreement are
references to Articles, Sections, clauses and Schedules in or to this Agreement, unless otherwise specified.

Section 8.6    Terms Defined Elsewhere.The following terms are defined elsewhere in this Agreement,
as indicated below:

"Annual Financial Statement"

Section 3.8."Assets"

Section 3.18"Audits"

Section 3.14.5"Budget"

Section 5.1.5"Capital Securities"

Section 3.5.1"Certificate of Merger"

Section 1.2"Certificates"

Section 2.2.2"Choucair Employment Agreement"

Section 5.21"Closing Notice"

Section 2.1.1"Closing Parent Common Stock Price"

Section 2.1.1"Code"

Recitals"Company"

Preamble"Company Board"

Section 3.3


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"Company Capital Stock"

Section 2.1.3"Company Charter"

Section 3.2"Company Common Stock

Section 2.1.1"Company Designees"

Section 5.20.1"Company Disclosure Letter"

Article 3"Company Employees"

Section 5.13"Company Options"

Section 3.4.2"Company Permits"

Section 3.13.2"Company Recommendation"

Section 5.7.3"Company Representatives"

Section 5.6.1"Company Stockholders' Meeting"

Section 5.5"Company Stockholder Voting Agreement"

Recitals"Confidentiality Agreement"

Section 5.6.2"Continuing Directors"

Section 5.20.1"Covered Persons"

Section 5.4.4"D&O Insurance"

Section 5.14.2"DGCL"

Recitals"Effective Time"

Section 1.2"Employee Plans"

Section 3.16.1"ERISA"

Section 3.16.1"ERISA Affiliate"

Section 3.16.1"Excess Shares"

Section 2.2.5.1"Exchange Agent"

Section 2.2.1"Exchange Fund"

Section 2.2.1"Exchange Ratio"

Section 2.1.1"Financial Statements"

Section 3.8.1"Foreign Benefit Plan"

Section 3.16.9"Former Employee Plans"

Section 3.16.1"Ginsburg Employment Agreement"

Section 5.21"Ginsburg Voting Agreement"

Recitals"Initial Merger Agreement"

Recitals"Interim Period"

Section 5.1"Interim Unaudited Financial Information"

Section 5.19"Leased Real Property"

Section 3.10.2"Lockup Agreement"

Recitals"Material Contracts"

Section 3.10.2"Merger"

Recitals"Merger Consideration"

Section 2.1.2"Merger Sub"

Preamble"Monthly Unaudited Financial Information"

Section 5.19"Multiemployer Plan"

Section 3.16.3"Parent"

Preamble"Parent Benefit Plans"

Section 5.13"Parent By-laws"

Section 4.2"Parent Certificate"

Section 4.2"Parent Common Stock"

Section 2.1"Parent Disclosure Letter"

Article 4"Parent Options"

Section 4.3"Parent Personal Property Leases"

Section 4.8.1"Preferred Per Share Amounts"

Section 2.1.2"Personal Real Property Leases"

Section 4.8.2


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"Parent Representatives"

Section 5.6.1"Parent Stockholder Approval"

Section 4.4"Parent Stock Option Plans"

Section 5.2(b)"Parent SEC Filings"

Section 4.7.1"Personal Property Leases"

Section 3.10.2"Preferred Conversion"

Recitals"Pro Rata Portion"

Section 2.2.10"Proxy Statement"

Section 5.4.1"Purchase Price"

Section 2.1.1"Quarterly Unaudited Financial Information"

Section 5.19"Real Property Leases"

Section 3.10.2"Releases"

Section 3.29"Registration Statement"

Section 5.4.1"Roland Employment Agreement"

Section 5.21"Scheduled Contracts"

Section 4.8.4"Substitute Option Shares"

Section 5.19"Surviving Corporation"

Section 1.1"Tax Indemnification Agreement"

Section 3.14.11"Transfer Agreement"

Recitals"Treasury Regulations"

Section 3.14.13


Section 8.7    Rules of Construction.The parties agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefore, waive the application of any
law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

Section 8.8    Descriptive Headings.Titles and headings to Articles and Sections in this Agreement
are inserted for convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.

Section 8.9    Severability.If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

Section 8.10    Entire Agreement.This Agreement (together with the Exhibits, Parent Disclosure
Letter and Company Disclosure Letter and the other documents delivered pursuant hereto), each
Ancillary Agreement and the Confidentiality Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof, including the Initial Merger Agreement, and, except as otherwise expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.

Section 8.11    Assignment.No party may assign this Agreement without the prior written consent of
the other parties, and any such prohibited assignment shall be void. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors, assigns, heirs, and devisees of the parties.

Section 8.12    Parties in Interest.This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and their respective successors and assigns, and nothing in this
Agreement,

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express
or implied, other than pursuant to Section 5.14 or Section 8.7 is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.

Section 8.13    Governing Law.This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable conflicts of laws principles thereof.

Section 8.14    Consent to Jurisdiction.Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that it will not attempt to defeat or deny such personal
jurisdiction by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than a Federal or State court sitting in the State of Delaware.

Section 8.15    Jury Trial Waiver.The parties hereby agree to waive any right to trial by jury
with respect to any action or proceeding brought by any party relating to (i) this Agreement
and/or any understandings or prior dealings between the parties hereto, or (ii) the Property or any part thereof. The parties hereby acknowledge and agree that this Agreement constitutes a
written consent to waiver of trial by jury pursuant to any applicable state statutes.

Section 8.16    Disclosure.The Disclosure Letter of each party shall be arranged in sections and
subsections corresponding to the sections and subsections with respect to which they provide
disclosure. Any matter disclosed in any section of a party's Disclosure Letter shall be considered disclosed for other sections of such Disclosure Letter, but only to the extent it is reasonably
apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections. The provision of monetary or other quantitative thresholds for disclosure does not
and shall not be deemed to create or imply a standard of materiality hereunder.

Section 8.17    Counterparts.To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signatures on behalf of all
Parties appear on each counterpart of this Agreement. All counterparts of this Agreement shall collectively constitute a single agreement. Signatures to this Agreement may be transmitted by facsimile
and such signatures shall be deemed to be originals.

Section 8.18    Specific Performance.The parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

[signature
pages follow]

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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly
authorized.

| |  | DIGITAL GENERATION SYSTEMS, INC.
| |  | --------------------------------
| |  | By:                             
| |  | DG ACQUISITION CORP. IV         
| |  | By:                             
| |  | FASTCHANNEL NETWORK, INC.       
| |  | By:                             

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