Investors' Rights Agreement - IMGIS Inc., Washington Holdings LP, IBL Corp., IRS Partners #15 LP, 360 Capital Partners LP, Hummer Winblad Venture Partners LP, Attractor LP, Attractor Dearborn Partners LP, Attractor Institutional LP, Morgan Adams INC., 21st Century Internet Fund LP, Yip Family Trust, Majill Corp., F&W Investments, H&Q IMGIS Investors LP, Hambrecht & Quist California, Tahmoush Family Trust, Laguna Pacific Professional Sales & Marketing Inc., Landview Ltd., Convergence Ventures I LP, Convergence Entrepreneurs I LP, Comdisco INC., Robert Cuevas, Del Mar Partners and America Online Inc.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is made as of the 15th day of July, 1998, by and between Imgis,
Inc., a California corporation (the "Company"), and certain shareholders of the
Company listed on SCHEDULE A hereto, each of which is herein referred to as an
"Investor."
RECITALS
WHEREAS, certain of the Investors (the "Existing Investors") hold shares of the
Company's Series A Preferred Stock and/or shares of Common Stock issued upon
conversion thereof (such shares held by the Existing Investors are referred to
herein as the "Series A Preferred Stock"), shares of the Company's Series B1
Preferred Stock and/or shares of Common Stock issued upon conversion thereof
(such shares held by the Existing Investors are referred to herein as the
"Series B1 Preferred Stock"), shares of the Company's Series C Preferred Stock
and/or shares of Common Stock issued upon conversion thereof (such shares held
by the Existing Investors are referred to herein as the "Series C Preferred
Stock") or shares of the Company's Series D Preferred Stock and/or shares of
Common Stock issued upon conversion thereof (such shares held by the Existing
Investors are referred to herein as the "Series D Preferred Stock") and possess
registration rights, information rights, rights of first offer and other rights
pursuant to an Amended and Restated Investors' Rights Agreement dated as of
April 27, 1998, between the Company and such Investors (the "Prior Agreement");
and
WHEREAS, the Existing Investors are holders of at least a majority of
the outstanding "Registrable Securities" of the Company (as defined in the Prior
Agreement), and desire to terminate the Prior Agreement and to accept the rights
created pursuant hereto in lieu of the rights granted to them under the Prior
Agreement; and
WHEREAS, certain of the Investors (the "Series E Investors") are
parties to the Series E Preferred Stock Purchase Agreement of even date herewith
between the Company and the Series E Investors (the "Purchase Agreement"),
certain of the Company's and such Investors' obligations under which are
conditioned upon the execution and delivery of this Agreement by such Investors;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the Company and the Existing Investors hereby agree that the
Prior Agreement shall be superseded and replaced in its entirety by this
Agreement, and the parties hereto further agree as follows:
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1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof.
(d) The term "1934 Act" means the Securities Exchange Act
of 1934, as amended.
(e) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock, the
Series B1 Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Company's Series D1 Preferred Stock (the "Series D1 Preferred Stock")
or the Company's Series E Preferred Stock (the "Series E Preferred Stock"), (ii)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" means the Securities and Exchange
Commission.
(i) The term "Series D Holders" means the holders of (i)
Common Stock issued upon conversion of the Series D Preferred Stock or Series D1
Preferred
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Stock or (ii) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his rights under this Section 1 are not assigned.
(j) The term "Series E Holders" means the holders of (i)
Common Stock issued upon conversion of the Series E Preferred Stock or (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the
earlier of (i) July 2, 2000, or (ii) six (6) months after the effective date of
the first registration statement for a public offering of securities of the
Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Holders of at least (w) 30% of the voting power of the outstanding Series B1
Preferred Stock, (x) 30% of the voting power of the outstanding Series C
Preferred Stock, (y) a majority of the voting power of the outstanding Series D
Preferred Stock and Series D1 Preferred Stock or (z) a majority of the voting
power of the outstanding Series E Preferred Stock (in each case including Common
Stock issued upon conversion thereof, and so long as the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$7,500,000; provided, however, that such dollar limitation shall not apply in
the case of a written request from the Series D Holders or Series E Holders),
then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event
within 60 days of the receipt of such request, the registration under the Act of
all Registrable Securities which the Holders request to be registered, subject
to the limitations of subsection 1.2(b), within twenty (20) days of the mailing
of such notice by the Company in accordance with Section 3.5 of this Agreement.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to subsection 1.2(a) and the
Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be a nationally recognized
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underwriter selected by the Company and shall be reasonably acceptable to a
majority in interest of the Initiating Holders. In such event, the right of
any Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 1.4(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting shall not
be reduced unless all other securities are first entirely excluded from the
underwriting; and provided further, however, that in the event that the Series
D Holders or Series E Holders are the Initiating Holders, the number of shares
of Registrable Securities held by the Series D Holders or Series E Holders, as
applicable, to be included in such underwriting shall not be reduced unless all
other Registrable Securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the Chief Executive Officer of the Company stating
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its shareholders for such
registration statement to be filed and it is therefore essential to defer the
filing of such registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than 120 days
after receipt of the request of the Initiating Holders (or 60 days after receipt
of the request of the Initiating Holders in the event that the Series D Holders
or Series E Holders are participating in such offering); provided, however, that
the Company may not utilize this right more than once in any twelve-month
period.
(d) The Company shall not be obligated to effect more than
an aggregate of two registrations pursuant to Sections 1.2(a)(w) and 1.2(a)(x),
more than one registration pursuant to Section 1.2(a)(y), and more than one
registration pursuant to Section 1.2(a)(z), provided that such registrations
have been declared or ordered effective. In addition, the Company shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 1.2:
(i) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of
any registration subject to
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Section 1.3 hereof (provided that the Company has selected and engaged an
underwriter and otherwise commenced active efforts to prepare for such filing),
and ending, in any case, on a date one hundred eighty (180) days after the
effective date of, a registration subject to Section 1.3 hereof; provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective; or
(ii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a merger,
exchange offer or similar transaction of the type described in Commission Rule
145(a) on Form S-4 or similar forms that may be promulgated in the future), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of such notice by the Company in accordance with Section 3.5,
the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days from the effective date of such registration statement or until the
distribution contemplated in the Registration Statement has been completed;
provided, however, that (i) such 120-day period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of the
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation
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by reference of information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934
Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities
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are delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters,
on the date that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Securities.
1.5 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
such Holder's Registrable Securities.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses (other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2) incurred in
connection with registrations, filings and qualifications of Registrable
Securities pursuant to Section 1.2 shall be borne by the Company, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders) and the reasonable fees
and disbursements of one counsel for the selling Holders; provided, however,
that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 1.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all Initiating
Holders shall bear such expenses), unless the Initiating Holders agree to
forfeit their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Initiating Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Initiating Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Initiating Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.2; and provided further, however, that
notwithstanding the foregoing, such expenses of the Series D Holders and Series
E Holders shall be borne by the Company in the event that the Company deferred
such registration pursuant to Section 1.2(c), and the Series D Holders and
Series E Holders shall retain their rights pursuant to Section 1.2.
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1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company (including
fees and disbursements of counsel for the Company in its capacity as counsel to
the selling Holders hereunder; if Company counsel does not make itself available
for this purpose, the Company will pay the reasonable fees and disbursements of
one counsel for the selling Holders), but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting, which terms shall be customary for similar transactions, as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not, jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by shareholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling Shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below thirty percent 30% of the total amount
of securities included in such offering, provided, however, that the Registrable
Securities held by 360 Capital Partners, L.P. ("360 Capital") and any transferee
acquiring at least 317,216 shares of Series C Preferred Stock (or the Common
Stock issuable upon the conversion thereof) from 360 Capital, and the
Registrable Securities held by each of America Online, Inc. ("AOL"), Attractor
Ventures L.L.C., Hummer Winblad Venture Partners II, L.P. and 21st Century
Internet Fund, L.P., and their affiliates, shall not be excluded unless all
other shareholders' securities have been entirely excluded from such offering;
provided further, however, if such offering is the initial public offering of
the Company's securities, all of the selling shareholders may be excluded if the
underwriters make the determination described above and no other shareholder's
securities are included, or (ii) notwithstanding (i) above, any shares being
sold by a shareholder exercising a demand registration right similar to that
granted in Section 1.2 be excluded from such offering. For purposes of the
preceding parenthetical concerning apportionment, for any selling shareholder
which is a holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and shareholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling
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shareholder", and any pro-rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, or the 1934 Act or any state securities law; and
the Company will pay to each such Holder, underwriter or controlling person,
as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter
or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, or the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
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any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.10(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 1.10(b)
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
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(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed
by the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after
the end of the fiscal year in which the first registration statement filed by
the Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), or that
it qualifies as a registrant whose securities may be resold pursuant to Form
S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive
from any Holder of the then outstanding Series B1 Preferred Stock (or Common
Stock issuable upon conversion thereof), the then outstanding Series C
Preferred Stock (or Common Stock issuable upon conversion thereof), the then
outstanding Series D Preferred Stock and Series D1 Preferred
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Stock (or Common Stock issuable upon conversion thereof) or the then
outstanding Series E Preferred Stock (or Common Stock issuable upon
conversion thereof) a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written
request given within 15 days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.12: (1) if Form S-3 is not available for such offering by the Holders; (2)
if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of
less than $1,000,000; provided further, however, that in the case of a
request by the Series E Holders, the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.12: (1) if Form S-3 is not available for such offering by the Series E
Holders; (2) if the Series E Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) at an
aggregate gross price to the public of less than $3,000,000, or (3) the
Company has effected two registrations during the prior twelve month period
pursuant to this Section 1.12 in which the Series E Holders participated and
such registrations have been declared or ordered effective.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All expenses incurred in
connection with a registration requested pursuant to Section 1.12, including
(without limitation) all registration, filing, qualification, printer's and
accounting fees and the reasonable fees and disbursements of counsel for the
selling Holder or Holders and counsel for the Company, shall be borne by the
Company. Registrations effected pursuant to this Section 1.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may
be assigned (but only with all related obligations) by a Holder to a
transferee or assignee of such securities, provided: (a) the Company is,
within a reasonable time after such transfer, furnished with written notice
of
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the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and (b) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without limitation the
provisions of Section 1.15 below. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated
together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
1.2 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount
of the Registrable Securities of the Holders which is included, (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subsection 1.2(a) or within one hundred twenty (120) days of the effective
date of any registration effected pursuant to Section 1.2, or (c) to include
such securities in any registration pursuant to Section 1.3 that would result
in the exclusion of Registrable Securities held by 360 Capital or any
transferee acquiring at least 317,216 shares of Series C Preferred Stock (or
the Common Stock issuable upon the conversion thereof) from 360 Capital or of
Registrable Securities held by AOL, Attractor Ventures L.L.C., Hummer Winblad
Venture Partners II, L.P. or 21st Century Internet Fund, L.P. or their
affiliates.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby
agrees that, during the period of duration (not to exceed 180 days) specified
by the Company and an underwriter of common stock or other securities of the
Company, following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at
any time during such period except common stock included in such registration
or common stock purchased in the public market following such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
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(b) all officers and directors of the Company and all
other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements; and
(c) such market stand-off time period shall not exceed
180 days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be
promulgated in the future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms which may be promulgated in
the future.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right
provided for in this Section 1 after five (5) years following the
consummation of the sale of securities pursuant to a bona fide, firmly
underwritten public offering of shares of Common Stock, registered under the
Act pursuant to a registration statement, at an offering price of at least
$13.73 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and in which aggregate net proceeds to
the Company total at least $20,000,000.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 1.3 shall
terminate on the closing of the first Company-initiated registered public
offering of Common Stock of the Company if all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any 90-day period.
1.17 AMENDMENTS AND WAIVERS. Any term contained in Section 1
of this Agreement may be amended and the observance of any term in Section 1
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and the holders of a majority of the Registrable Securities then
outstanding; provided, however, that if a particular holder's rights are
adversely affected in a manner different from those of other holders, then
any such amendment or waiver requires the written consent of the Company and
seventy-five percent (75%) of the Registrable Securities then outstanding;
provided further, however, that if the rights of a holder of Series D
Preferred Stock or Series D1 Preferred Stock (or the Common Stock issued upon
conversion thereof) are affected in any way, then any such amendment or
waiver requires the separate written consent of a majority of the then
outstanding Series D Preferred Stock and Series D1 Preferred Stock (or the
Common Stock issued upon conversion thereof), consenting on
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an as-converted basis; provided further, however, that if the rights of a
holder of Series E Preferred Stock (or the Common Stock issued upon
conversion thereof) are affected in any way, then any such amendment or
waiver requires the separate written consent of a majority of the then
outstanding Series E Preferred Stock (or the Common Stock issued upon
conversion thereof), consenting on an as-converted basis. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of
all such Registrable Securities, and the Company.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall
deliver to 360 Capital so long as 360 Capital holds at least 158,563 shares
of Series C Preferred Stock (or Common Stock issuable upon the conversion
thereof) and to any transferee acquiring at least 317,216 shares of Series C
Preferred Stock, Series D Preferred Stock, Series D1 Preferred Stock or
Series E Preferred Stock (or Common Stock issuable upon the conversion
thereof) from 360 Capital, and each of AOL, Attractor Ventures L.L.C., Hummer
Winblad Venture Partners II, L.P., 21st Century Internet Fund, L.P., and IBL
Corporation:
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement
of shareholder's equity as of the end of such year, and a statement of cash
flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles
("gaap"), and audited and certified by independent public accountants of
nationally recognized standing selected by the Company;
(b) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows and balance sheet for
and as of the end of such month, in reasonable detail;
(c) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement,
statement of cash flows for such fiscal quarter and an unaudited balance
sheet and a statement of shareholder's equity as of the end of such fiscal
quarter.
(d) as soon as practicable, but in any event thirty (30)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year, prepared on a monthly basis, including balance sheets and
statements of cash flows for such months and, as soon as prepared, any other
budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for
in subsections (b) and (c) of this Section 2.1, an instrument executed by the
Chief Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with
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gaap consistently applied with prior practice for earlier periods (with the
exception of footnotes that may be required by gaap) and fairly present the
financial condition of the Company and its results of operation for the
period specified, subject to year-end audit adjustment; and
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this
subsection (f) or any other subsection of Section 2.1 to provide information
which it deems in good faith to be a trade secret or similar confidential
information; and the right to receive financial statements provided in this
Section 2.1 may not be assigned or transferred, except that (i) such right is
assignable by each Holder to any wholly owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Act,
controlling, controlled by or under common control with, any such Holder and
(ii) such right is assignable to a party acquiring at least 317,126 shares of
Series C Preferred Stock (or the Common Stock issuable upon the conversion
thereof) from 360 Capital.
2.2 INSPECTION. The Company shall permit each Investor, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable
times as may be requested by the Investor; provided, however, that the
Company shall not be obligated pursuant to this Section 2.2 to provide access
to any information which it reasonably considers to be a trade secret or
similar confidential information. 360 Capital, a holder of Series C Preferred
Stock of the Company, shall be entitled to receive inspection rights so long
as 360 Capital holds at least 158,563 shares of Series C Preferred Stock as
shall any person acquiring at least 317,126 shares of Series C Preferred
Stock (or the Common Stock issuable upon the conversion thereof) from 360
Capital.
2.3 RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this Section 2.3, the Company hereby grants to each
Major Investor (as hereinafter defined) a right of first offer with respect
to future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.3, a Major Investor shall mean the Holders of
Series B1 Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series D1 Preferred Stock, Series E Preferred Stock, or Common Stock
issued upon conversion thereof. For purposes of this Section 2.3, a Major
Investor includes any general partners and affiliates of an Investor. 360
Capital shall be entitled to a right of first offer so long as 360 Capital
holds at least 158,563 shares of Series C Preferred Stock. A Major Investor
shall be entitled to apportion the right of first offer hereby granted it
among itself and its partners and affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or any
securities convertible into or exercisable or exchangeable for any shares of,
any class of its capital stock ("Shares"), the Company shall first make an
offering of such Shares to each Major Investor in accordance with the
following provisions:
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(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice,
the Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Preferred Stock then held, by such Major
Investor bears to the total number of shares of Common Stock of the Company
then outstanding, assuming in the denominator the conversion of all Preferred
Stock and other convertible securities then outstanding and the exercise of
all warrants, options and other rights then outstanding to purchase Common
Stock or other securities convertible into Common Stock (the "Pro Rata Share
of the Company's Outstanding Equity Securities"); provided, however, that in
the event that the consummation of the sale of the Shares as described in the
Notice would result in any person or group of affiliated persons holding,
immediately following such issuance, a greater Pro Rata Share of the
Company's Outstanding Equity Securities than would then be held collectively
by AOL and its affiliates, if AOL and its affiliates had, immediately prior
to such issuance, held at least 546,249 shares (appropriately adjusted to
reflect any subsequent stock dividends, combinations, splits,
recapitalizations and the like) of Series E Preferred Stock or the equivalent
number of shares of Common Stock issued upon conversion thereof, or any
equivalent combination of shares of Series E Preferred Stock and Common Stock
issued upon conversion thereof, but excluding any shares of Series E
Preferred Stock issued upon the exercise of any warrant or any shares of
Common Stock issued upon conversion thereof, then AOL and its affiliates may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to the minimum number of Shares which would result in AOL and its
affiliates holding collectively, immediately following the issuance of the
Shares, the largest Pro Rata Share of the Company's Outstanding Equity
Securities (the "AOL Right of First Offer") and, if necessary, the Pro Rata
Share of the Company's Outstanding Equity Securities of each other Major
Investor shall be reduced proportionately. The Company shall promptly, in
writing, inform each Major Investor which purchases all the shares available
to it ("Fully-Exercising Investor") of any other Major Investor's failure to
do likewise. During the ten-day period commencing after receipt of such
information, each Fully-Exercising Investor shall be entitled to obtain that
portion of the Shares not subscribed for by the Major Investors which is
equal to the proportion that the number of shares of Common Stock issued and
held, or issuable upon conversion of Preferred Stock then held, by such
Fully-Exercising Investor bears to the total number of shares of Common Stock
issued and held, or issuable upon conversion of Preferred Stock then held, by
all Fully-Exercising Investors who wish to purchase some of the unsubscribed
shares (the "Gobble-Up Right"); provided, however, that in the event that the
exercise of the Gobble-Up Right results in any person or group of affiliated
persons holding, immediately following such issuance, a greater Pro Rata
Share of the Company's Outstanding Equity Securities than would then be held
collectively by AOL and its affiliates, AOL and its affiliates may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up
to the minimum number of Shares which
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would result in AOL and its affiliates holding collectively, immediately
following the issuance of the Shares, the largest Pro Rata Share of the
Company's Outstanding Equity Securities.
(c) If all Shares which Major Investors are entitled to
obtain pursuant to Section 2.3(b) are not elected to be obtained as provided
in Section 2.3(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in Section 2.3(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than,
those specified in the Notice. If the Company does not enter into an
agreement for the sale of such Shares within such period, or if such
agreement is not consummated within 30 days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such Shares shall
not be offered unless first reoffered to the Major Investors in accordance
herewith.
(d) The right of first offer in this Section 2.3 shall
not be applicable (i) to the issuance or sale of not to exceed a total of
4,509,960 shares (appropriately adjusted to reflect any subsequent stock
dividends, combinations, splits, recapitalizations and the like) of Common
Stock (or options therefor) to consultants, non employees, directors and
employees for the primary purpose of soliciting or retaining their
employment, (ii) after consummation of a bona fide, firm commitment
underwritten public offering of shares of Common Stock, registered under the
Act pursuant to a registration statement, which results in aggregate net cash
proceeds to the Company of $20,000,000 or greater and the public offering
price of which is not less than the Qualifying Price Per Share (as used
herein, the "Qualifying Price Per Share" shall mean the quotient of
$125,000,000 divided by the number of shares of the Company's Common Stock
outstanding immediately prior to the consummation of such offering, assuming
full conversion and exercise of all convertible and exercisable securities
then outstanding) (a "Qualified IPO"), (iii) the issuance of securities
pursuant to the conversion or exercise of convertible or exercisable
securities, (iv) the issuance of securities in connection with a bona fide
business acquisition by the Company, whether by merger, consolidation, sale
of assets, sale or exchange of stock or otherwise, (v) with respect to Major
Investors other than the Series D Investors and their affiliates and the
Series E Investors and their affiliates, the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has
business relationships provided such issuances are for other than primarily
equity financing purposes and provided that at the time of any such issuance,
the aggregate of such issuance and similar issuances in the preceding twelve
month period do not exceed 2% of the then outstanding Common Stock of the
Company (assuming full conversion and exercise of all convertible and
exercisable securities then outstanding), (vi) the issuance of Series E
Preferred Stock pursuant to the terms of the Purchase Agreement, (vii) with
respect to Major Investors other than the Series D Investors and their
affiliates in the limited circumstances described in Section 2.3(e) below,
the issuance of securities in a Qualified IPO or (ix) with respect to Major
Investors other than the Series E Investors and their affiliates, the
issuance of securities in connection with the AOL Right of First Offer.
(e) The right of first offer held by the Series D
Investors and their affiliates to purchase shares of Common Stock in a
Qualified IPO shall be limited to a
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number of shares of Common Stock equal to the lesser of (i) 25% of the number
of shares of Common Stock issued or issuable upon conversion of Series D
Preferred Stock and held by such Investors immediately prior to the
consummation of the Qualified IPO and (ii) 3% of the number of shares of
Common Stock offered and sold by the Company in a Qualified IPO (exclusive of
any shares offered and sold pursuant to any underwriter's over-allotment
option); provided, however, that the underwriter of such offering, if any,
shall be entitled to reduce this right of first offer to the extent deemed
necessary in the underwriter's reasonable judgment (x) to the success of the
offering for reasons set forth in writing no less than two weeks prior to the
anticipated effective date of the registration statement covering such
offering, or (y) to comply with the rules or regulations of the Securities
and Exchange Commission, the National Association of Securities Dealers,
Inc., the Nasdaq Stock Market, Inc., or other regulatory body for reasons set
forth in writing no less than one day prior to the anticipated effective date
of the registration statement covering such offering. For purposes of this
Section 2.3(e), the provisions of Section 2.3(a), (b) and (c) apply in the
following manner: (i) as to Section 2.3(a), the Notice shall be delivered by
facsimile transmission to the Series D Investors no less than one day prior
to the anticipated effective date of the registration statement covering such
offering and shall state (A) the Company's bona fide intention to offer such
Shares in a Qualified IPO, (B) the number of such Shares to be offered in
such Qualified IPO, and (C) the Price Range and the Terms upon which it
proposes to offer such Shares; (ii) as to Section 2.3(b), the Series D
Investors shall, within 24 hours after receipt of the Notice, irrevocably
elect to exercise the Shares to which they are entitled in this Section
2.3(e), or forfeit such right; and (iii) as to Section 2.3(c), if the Company
does not consummate the sale of the Shares in such Qualified IPO within 30
days of the Notice within the Price Range and according to the Terms, the
right provided hereunder shall be deemed revived as to all of the Series D
Investors. For purposes hereof, the term "Price Range" shall mean a good
faith estimate range of the proposed initial offering price of such Shares,
the lower end of which shall be no less than 70% of the higher end, and the
term "Terms" shall mean a draft of the proposed underwriting agreement to be
entered into between the Company and the underwriting of such offering, if
any.
(f) The right of first offer set forth in this Section
2.3 may not be assigned or transferred, except that (i) such right is
assignable by each Holder to any wholly owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Act,
controlling, controlled by or under common control with, any such Holder,
(ii) such right (other than the right described in Section 2.3(e)) is
assignable between and among any of the Holders, (iii) such right is
assignable to a party, other than an assignee under clause (i) or (ii) above,
acquiring at least 317,126 shares of Series C Preferred Stock (or Common
Stock issuable upon the conversion thereof) from 360 Capital, (iv) such right
(other than the right described in Section 2.3(e)) is assignable to a party,
other than an assignee under clause (i) or (ii) above, acquiring at least
53,857 shares of Series D Preferred Stock or Series D1 Preferred Stock (or
Common Stock issuable upon the conversion thereof) from the Series D
Investors, and (v) such right (other than the AOL Right of First Offer) is
assignable to a party, other than an assignee under clause (i) or (ii) above,
acquiring at least 127,459 shares of Series E Preferred Stock (or Common
Stock issuable upon the conversion thereof) from the Series E Investors.
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2.4 OBSERVER RIGHTS. As long as IBL Corporation owns not
less than 150,000 shares of Series A Preferred Stock (or an equivalent amount
of Common Stock issued upon conversion thereof), the Company shall invite a
representative of IBL Corporation to attend all meetings of its Board of
Directors, at its own expense, in a nonvoting observer capacity. As long as
360 Capital owns not less than 200,000 shares of Series C Preferred Stock (or
an equivalent amount of Common Stock issued upon conversion thereof), the
Company shall invite a representative of 360 Capital who is either a
Metromail employee or an individual designated by 360 Capital who is
reasonably acceptable to the Board of Directors to attend all meetings of its
Board of Directors, at its own expense, in a nonvoting observer capacity.
For so long as AOL and its affiliates collectively hold at least 364,166
shares of Series E Preferred Stock (appropriately adjusted for any stock
split, dividend, combination or other recapitalization) or the equivalent
number of shares of Common Stock issued upon conversion thereof, or any
equivalent combination of shares of Series E Preferred Stock and Common Stock
issued upon conversion thereof, and do not have a representative on the
Company's Board of Directors, the Company shall invite a representative
designated by AOL to attend all meetings of its Board of Directors, at its
own expense, in a nonvoting observer capacity (the "AOL Observer"). The
Company shall provide such representatives with the same financial and other
information that is provided to the members of the Board of Directors in
connection with any meetings of the Board of Directors of the Company,
subject to the limitations set forth in this Section 2.4. As a condition of
the rights granted in this Section, each of IBL Corporation and 360 Capital
agree to hold in confidence and trust and to act in a fiduciary manner with
respect to all information provided in connection with any meetings of the
Board of Directors of the Company, and AOL and each representative of IBL
Corporation, 360 Capital and AOL shall agree to sign a customary
nondisclosure agreement to hold in confidence any information provided in
connection with any meetings of the Board of Directors of the Company; and,
provided further, that the Company reserves the right to withhold any
information and to exclude a representative from any meeting or portion
thereof if access to such information or attendance at such meeting could
adversely affect the attorney-client privilege between the Company and its
counsel. If any information is so withheld from the representative of AOL,
the Company shall notify such representative of the general subject matter of
such information. The Company shall pay the reasonable expenses for a
representative of 360 Capital, Hummer-Winblad Venture Partners II, L.P., 21st
Century Internet Fund, L.P., Convergence Ventures I, L.P. and AOL to attend
meetings of the Board of Directors of the Company that are held more than
fifty miles from San Francisco International Airport.
2.5 TRANSACTIONS WITH AFFILIATES. The Company shall not,
without the approval of a majority of the disinterested members of the
Company's Board of Directors, engage in any loans, leases, contracts or other
similar transactions (including, but not by way of limitation, the payment of
dividends or the repurchase of securities) with Charles Berger, Chad
Steelberg, Ryan Steelberg, Dirk Wray, members of their immediate family or
entities controlled by them. For purposes of this Section 2.5, "immediate
family" shall be deemed to include parents, children, siblings and spouse.
2.6 SALE OF PRODUCT LINE OR TECHNOLOGY. The Company shall
not, without the approval of the holders of a majority of the voting power of
the Series B1 Preferred
20
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Stock, Series C Preferred Stock, Series D Preferred Stock, Series D1
Preferred Stock and Series E Preferred Stock, voting together as a single
class, sell, convey, or otherwise dispose of a material product line or sell
or grant an exclusive license of technology material to the Company's
business as presently conducted or as proposed to be conducted.
2.7 FUTURE ISSUANCES OF PREFERRED STOCK. The Company shall
not, without the approval of 360 Capital: (i) sell any shares of Series C
Preferred Stock to existing Series A Preferred Stock holders or Series B1
Preferred Stock holders beyond the number of shares sold to date or (ii)
issue any additional shares of Series A Preferred Stock or Series B1
Preferred Stock.
2.8 ACQUISITION RIGHT OF FIRST OFFER.
(a) Prior to the Company entering into a binding
agreement with respect to an Acquisition Transaction (as hereinafter defined)
with an Identified Competitor (as hereinafter defined), the Company shall
provide written notice to AOL stating (i) that the Company is interested in
entering into such an agreement with an Identified Competitor, without naming
the Identified Competitor, and (ii) the price and principal terms of the
Acquisition Transaction (the "Acquisition Notice").
(b) For purposes of this Section 2.8, an "Acquisition
Transaction" shall mean the issuance by the Company of any equity securities
of the Company that would give an Identified Competitor the right to control
more than fifty percent (50%) of the voting power of the Company, the merger,
consolidation or similar corporate transaction with or into an Identified
Competitor as a result of which the voting securities of the Company
outstanding immediately prior to consummation of such transaction are
converted into cash or securities possessing less than fifty percent (50%) of
the voting power of the surviving entity, or the sale to an Identified
Competitor of all or substantially all of the assets of the Company, and an
"Identified Competitor" shall mean one of the ten (10) persons identified on
Exhibit A hereto; provided, however, that AOL shall modify Exhibit A on the
first anniversary of this Agreement so that Exhibit A identifies only five
(5) persons (and such five (5) persons need not have been included among the
ten (10) persons originally identified on Exhibit A); provided further, that
on each successive anniversary of this Agreement, AOL shall be entitled to
modify Exhibit A to substitute one new person for a person identified on
Exhibit A and/or add one new person to Exhibit A; provided further, that if
at any time any person identified on Exhibit A ceases to exist or otherwise
ceases to engage in the business with which it competes with AOL as of the
time that such person is first identified on Exhibit A, whether as a result
of sale, merger, liquidation or otherwise, or is merged into or acquired by
another person identified on Exhibit A, then AOL shall be entitled to
substitute a new person in place of such person on Exhibit A; and provided
further, that an "Identified Competitor" shall include any affiliate of any
person on Exhibit A that accounts on a consolidated basis with such person
identified on Exhibit A and shall include any successor of any person on
Exhibit A and any affiliate of such successor that accounts on a consolidated
basis with such successor. For purposes of this Section 2.8(b), "person"
shall mean any corporation, partnership or other business entity or any group
of such entities that are under
21
<PAGE>
common control.
(c) AOL shall have ten (10) business days following its
receipt of the Acquisition Notice to notify the Company in writing that AOL
intends to match the price and terms of the Acquisition Transaction described
in the Acquisition Notice.
(i) If AOL elects to notify the Company that AOL
intends to match the price and terms of the Acquisition Transaction described
in the Acquisition Notice, the Company and AOL will enter into good faith
negotiations with respect to an Acquisition Transaction for a period of up to
sixty (60) days following the date of AOL's election, and if the Company and
AOL do not execute a binding agreement to enter into an Acquisition
Transaction by the end of such sixty (60) day period, the Company will be
free for a period of ninety (90) days from the end of such sixty (60) day
period to enter into an Acquisition Transaction with any Identified
Competitor on terms no more favorable to such Identified Competitor than
those offered to AOL.
(ii) If AOL does not elect to notify the Company
that AOL intends to match the price and terms of the Acquisition Transaction
described in the Acquisition Notice within the ten (10) business day period
described in this Section 2.8(c), the Company will be free for a period of
ninety (90) days from the end of such ten (10) business day period to enter
into an Acquisition Transaction with an Identified Competitor on terms no
more favorable to such Identified Competitor than those offered to AOL.
(f) Provided that the Company has not breached its
obligations under this Section 2.8, AOL agrees that, prior to a Qualified
IPO, AOL and its affiliates will not exercise any dissenter's or appraisal
rights with respect to any shares of Series E Preferred Stock or any shares
of Common Stock into which the Series E Preferred Stock is converted that are
provided by the laws of the jurisdiction in which the Company is incorporated
in connection with a merger, consolidation or similar corporate transaction
of the Company into another person for consideration with an aggregate fair
market value of more than $150 million that would qualify for pooling of
interests accounting treatment, where: (i) such other person is an
Identified Competitor; or (ii) if such other person is not an Identified
Competitor, where the Company has provided at least fifteen (15) business
days' notice to AOL prior to the date that the Company signs a binding
agreement to enter into such transaction with such other person (provided
that the disclosure to the Company's Board of Directors of such transaction,
at a meeting at which the AOL Observer is present, shall be deemed to be
effective notice for such purposes) and has afforded AOL the opportunity to
propose a competing offer, provided that the procedures followed by the
Company with respect to the solicitation of a competing AOL offer do not
place AOL in a position that is less favorable than the position of such
other person. The foregoing waiver shall terminate and be of no further
force and effect in the event that (i) any holder of shares of any series of
the Company's Preferred Stock that are issued after the date of this
Agreement does not agree to be bound by the terms of this waiver (excluding
the terms to the extent that they relate specifically to an Identified
Competitor and the right of first offer with respect to an Acquisition
Transaction provided for in this Section 2.8), or (ii) if, under that certain
Amended and Restated Voting Agreement dated of even date herewith by and
among the
22
<PAGE>
Company, certain holders of the Company's Preferred Stock listed on Schedule
A thereto and certain holders of the Company's Common Stock listed on
Schedule B thereto (the "Voting Agreement"), AOL requests that a Major
Investor (as defined in the Voting Agreement) waive its dissenter's or
appraisal rights, and such waiver is subsequently held to be unenforceable
under applicable law.
2.9 TERMINATION OF CERTAIN COVENANTS. The covenants set
forth in this Section 2, other than those pertaining to the AOL Observer in
Section 2.4, shall terminate and be of no further force or effect upon a
Qualified IPO.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferee of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified,
upon deposit with the United States Post Office, by registered or certified
mail, or with a nationally recognized overnight courier specifying next day
delivery with written verification of receipt, postage prepaid and addressed
to the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties, or upon
facsimile transmission with printed verification of transmission to the party
to be notified at the facsimile number indicated for such party on the
signature page hereof, or at such other facsimile number as such party may
designate by ten (10) days' advance written notice to the other parties.
23
<PAGE>
3.6 EXPENSES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 AMENDMENTS AND WAIVERS. Any term contained in Section 2
or Section 3 of this Agreement may be amended and the observance of any term
in Section 2 or Section 3 of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of seventy-five
percent (75%) of the voting power of the then outstanding Registrable
Securities; provided, however, that any amendment or waiver affecting the
Series D Preferred Stock or Series D1 Preferred Stock in a different manner
than the other series of the Company's Preferred Stock may be waived only
with the separate written consent of the holders of a majority of the voting
power of the then outstanding shares of Series D Preferred Stock and Series
D1 Preferred Stock (or Common Stock issued upon conversion thereof),
consenting on an as-if converted to Common Stock basis; provided further,
however, that any amendment or waiver affecting the Series E Preferred Stock
in a different manner than the other series of the Company's Preferred Stock
may be waived only with the separate written consent of the holders of a
majority of the voting power of the then outstanding shares of Series E
Preferred Stock (or Common Stock issued upon conversion thereof), consenting
on an as-if converted to Common Stock basis. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder
of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 STANDSTILL PROVISION. No Existing Investor (excluding
the Series D Investors and the Series E Investors) or any entity affiliated
with such Investor shall acquire beneficial ownership of any additional
shares of the Company's capital stock from any party after the date of this
Agreement without the consent of the Board of Directors of the Company if
such acquisition would result in such Investor acquiring beneficial ownership
of forty-percent (40%) or more of the then outstanding capital stock of the
Company; provided, however, that the foregoing restriction shall not apply in
the event that such Investor has offered to purchase all of the then
outstanding capital stock of the Company on the same terms.
3.9 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
3.10 AGGREGATION OF STOCK. Unless otherwise provided herein,
all shares of Registrable Securities held or acquired by affiliated entities
or persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
24
<PAGE>
3.11 ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto) constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
IMGIS, INC.
By: /s/ Charles W. Berger
------------------------------------------
Charles W. Berger
Chief Executive Officer
Address: 10101 North DeAnza Blvd., Suite 210
Cupertino, CA 95014
INVESTORS:
----------
WASHINGTON HOLDINGS, L.P.
By: /s/ Dirk Wray
------------------------------------------
Title: Partner
---------------------------------------
Address: 30551 Hilltop Way
San Juan Capistrano, CA 92675
IBL CORPORATION
By: /s/ Pinak Maitra
------------------------------------------
Title: Vice President
---------------------------------------
Address: c/o Hunter Capital Group, L.L.C.
Attn: Larry Griffin
136 Heber Avenue, Suite 304
Park City, UT 84060
IRS PARTNERS #15, LP
By: /s/ ILLEGIBLE
------------------------------------------
Title: Officer
---------------------------------------
Address: 345 S. Figueroa, Suite 303
Los Angeles, CA 90071
COLLIN MADDIN
By: /s/ Collin Maddin
------------------------------------------
Address: 8787 Shoreham Dr., #308
West Hollywood, CA 90069
<PAGE>
360 CAPITAL PARTNERS, L.P.
By: /s/ ILLEGIBLE
------------------------------------------
Title: President
---------------------------------------
Address: 360 East 22nd Street
Lombard, IL 60148
HUMMER WINBLAD
VENTURE PARTNERS II, L.P.
By: /s/ Mark Gorenberg
------------------------------------------
Title: Partner
---------------------------------------
Address: 2 South Park, 2nd Floor
San Francisco, CA 94107
HUMMER WINBLAD
TECHNOLOGY FUND, L.P.
By: /s/ Mark Gorenberg
------------------------------------------
Title: Partner
---------------------------------------
Address: 2 South Park, 2nd Floor
San Francisco, CA 94107
HUMMER WINBLAD
TECHNOLOGY FUND II-A, L.P.
By: /s/ Mark Gorenberg
------------------------------------------
Title: Partner
---------------------------------------
Address: 2 South Park, 2nd Floor
San Francisco, CA 94107
<PAGE>
ATTRACTOR LP
By: Attractor Ventures LLC, its General Partner
By: /s/ Harvey Allison
----------------------------------------------
Harvey Allison, Managing Member
Address: 1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
ATTRACTOR DEARBORN PARTNERS LP
By: Attractor Ventures LLC, its General Partner
By: /s/ Harvey Allison
----------------------------------------------
Harvey Allison, Managing Member
Address: 1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
ATTRACTOR INSTITUTIONAL LP
By: Attractor Ventures LLC, its General Partner
By: /s/ Harvey Allison
----------------------------------------------
Harvey Allison, Managing Member
Address: 1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
MORGAN ADAMS, INC.
By: /s/ ILLEGIBLE
----------------------------------------------
Title: President & CFO
Address: 1545 Wilshire Blvd, Suite 700
Los Angeles, CA 90017
<PAGE>
21st CENTURY INTERNET FUND, L.P.
By: /s/ Neil Weintraut
----------------------------------------------
Title: Member
-------------------------------------------
Address: 2 South Park, 2nd Floor
San Francisco, CA 94107
YIP FAMILY TRUST
By: /s/ ILLEGIBLE
----------------------------------------------
Title: ILLEGIBLE
-------------------------------------------
Address: 18 Bridgeport Road
Newport Beach, CA 92657-1012
MAJILL CORPORATION
By: /s/ Hubert Secretan
----------------------------------------------
Title: Director/President
-------------------------------------------
Address: c/o #2 Rue Charles Bonnet
Geneva, Switzerland
F&W INVESTMENTS
By: /s/ ILLEGIBLE
----------------------------------------------
Address: Two Palo Alto Square
Palo Alto, CA 94306
H&Q IMGIS INVESTORS LP
By: /s/ Jackie Berterretche
----------------------------------------------
Title: Attorney-in-Fact
-------------------------------------------
Address: 1 Bush Street, Suite 1500
San Francisco, CA 94104
HAMBRECHT & QUIST CALIFORNIA
By: /s/ Jackie Berterretche
----------------------------------------------
Title: Attorney-in-Fact
-------------------------------------------
Address: 1 Bush Street, Suite 1500
San Francisco, CA 94104
<PAGE>
TAHMOUSH FAMILY TRUST
By: /s/ Carol H. Tahmoush
----------------------------------------------
Address: 28 Coventry
Newport Beach, CA 92660
LAGUNA PACIFIC PROFESSIONAL SALES &
MARKETING, INC.
By:
----------------------------------------------
Address: 4100 Birch Street, Suite 100
Newport Beach, CA 92660
LANDVIEW LIMITED
By:
----------------------------------------------
Title:
----------------------------------------------
Address: c/o Pettman Smith
79 Knightsbridge
London SWIX 7RB
ENGLAND
By:
----------------------------------------------
Ross Bott
Address: 152 Poplar Street
Half Moon Bay, CA 94019
<PAGE>
CONVERGENCE VENTURES I, L.P.
By: /s/ Eric Di Benedetto
----------------------------------------------
Title: General Partner
--------------------------------------------
Address: 3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
CONVERGENCE ENTREPRENEURS I, L.P.
By: /s/ Eric Di Benedetto
----------------------------------------------
Title: General Partner
--------------------------------------------
Address: 3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
COMDISCO, INC.
By: /s/ James P. Labe
----------------------------------------------
Title: President
--------------------------------------------
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
ROBERT CUEVAS
By: /s/ Robert Cuevas
----------------------------------------------
Robert Cuevas
Address: 4100 Birch Street, Suite 100
Newport Beach, CA
DEL MAR PARTNERS
By: /s/ Anthony M. Capozza
----------------------------------------------
Title: Managing Member
G & H Partners
By: /s/ Steven M. Spurlock
----------------------------------------------
Steven M. Spurlock
Address: 155 Constitution Drive
Menlo Park, CA 94025
<PAGE>
AMERICA ONLINE, INC.
By: /s/ David M. Colburn
----------------------------------------------
David M. Colburn
Senior Vice President, Business Affairs
Address: 22000 AOL Way
Dulles, VA 20166
<PAGE>
SCHEDULE A
EXISTING INVESTORS
360 Capital Partners, L.P.
21st Century Internet Fund, L.P.
Attractor LP
Attractor Dearborn Partners LP
Attractor Institutional LP
Ross Bott
Comdisco, Inc.
Convergence Ventures I, L.P.
Convergence Entrepreneurs I, L.P.
Robert Cuevas
Del Mar Partners, LP
F & W Investments 1997
G & H Partners
Hambrecht & Quist California
H & Q Imgis Investors LP
Hummer Winblad Technology Fund II-A L.P.
Hummer Winblad Technology Fund II L.P.
Hummer Winblad Venture Partners II L.P.
IBL Corporation (is also a Series D investor)
IRS Partners #15, LP
Landview Limited
Marcia Lou Hobbs Living Trust dated 8/27/96
Collin Madden
<PAGE>
Mcjill Corporation
Morgan Adams, Inc.
Michael Oschmann
Querry Family Trust
Tahmoush Family Trust
Washington Holdings, L.P.
YIP Family Trust
SERIES E INVESTORS
------------------
America Online, Inc.
<PAGE>
EXHIBIT A
1. Yahoo
2. Microsoft
3. CNet
4. DoubleClick
5. 24 X 7 Media
6. CMG Information Services
7. Netscape
8. Disney
9. AT&T
10. AdSmart