Sample Business Contracts

        Section 1.1    Definitions.    For purposes of this Agreement:

Securities (excluding the Registrable Securities held by the Founder). For the purposes of such calculation, the holders of the Preferred Stock shall be deemed to hold the shares of Common Stock then issuable upon conversion of such Preferred Stock

        (f)    "IPO" shall mean the sale of the Company's securities pursuant to a registration statement filed by the Company under the Securities Act in connection with the initial offering of its securities to the general public.

        (g)   "Major Shareholder" shall mean a Holder who, together with its affiliates, owns at least 850,000 shares (appropriately adjusted for any stock splits, stock dividends, combinations, recapitalizations and the like) of Registrable Securities.

        (h)   "Preferred Stock" shall mean the Company's Series B Preferred Stock, Series C Preferred Stock, Series E Preferred Stock and any other series of preferred stock of the Company that may be acquired by the Investors.

        (i)    "Qualified IPO" shall mean a firm commitment underwritten public offering of shares of Common Stock under the Securities Act with gross proceeds to the Company of at least $25,000,000 in the aggregate, net of underwriting commissions.

        (j)    The terms "register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

        (k)   "Registration Expenses" shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, expenses of any regular or special audits incident to or required by any such registration, but shall not include any Selling Expenses.

        (l)    "Registrable Securities" shall mean the Series E Registrable Securities and the Series B/C Registrable Securities.

        (m)  The number of shares of "Registrable Securities then outstanding" (or "Series E Registrable Securities then outstanding" or "Series B/C 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 (or Series E Registrable Securities or Series B/C Registrable Securities, as the case may be).

        (n)   "Rule 144" shall mean Rule 144 as promulgated by the SEC under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC.

        (o)   "SEC" shall mean the Securities and Exchange Commission.

        (p)   "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor Federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time, corresponding to such act.

        (q)   "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for any Holder (other than the fees and disbursements of (i) counsel for the Company included in Registration Expenses and (ii) one counsel for the Selling Holders as provided in Section 1.8).

        Section 1.2    Request for Registration.    

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 Section 1.6(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 Company that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities, which would otherwise be underwritten pursuant hereto, and the number of securities that may be included in the underwriting pursuant to this Section 1.2 shall be allocated in the following order:

provided, however, that in any underwriting pursuant to this Section 1.2, 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.

        (c)   Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration 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 a registration statement to be filed, to become effective or to remain effective, 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 ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not use this right more than once in any twelve (12) month period.

        (d)   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:

        Section 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 the Holders or shareholders other than the Holders) any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include (taking into account any information incorporated by reference) substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), 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 giving such notice by the Company in accordance with Section 4.5, the Company shall, subject to Section 1.5, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.

        Section 1.4    Form S-3 Registration.    In the event that the Company shall receive a written request from any Holder or Holders of Registrable Securities then outstanding having a market value of at least $1,000,000 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 shall (i) within fifteen (15) days of the receipt thereof, give written notice of the proposed registration, and any related qualification or compliance, to all other Holders and (ii) subject to Section 1.5 hereof, prepare and file, as expeditiously as reasonably possible and in any event within seventy-five (75) days of receipt of such request, a registration statement on Form S-3 with the SEC and use its best efforts to effect, as expeditiously as reasonably possible, 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 thirty (30) days after receipt of such written notice from the Company.

        Section 1.5    Allocation of Registration Opportunities.    

including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities to be 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); provided, however, that the managing underwriter shall limit or exclude up to all of the securities of holders of capital stock of the Company as follows: (i) first, among securities requested to be included in such registration by any shareholder of the Company other than a Holder and otherwise eligible to be included in such registration, (ii) second, ratably among the Series B/C Registrable Securities requested by the Holders to be included in such registration and otherwise eligible to be included in such registration, (iii) third, ratably among the Series E Registrable Securities requested by the Holders to be included in such registration and otherwise eligible to be included in such registration, and (iv) fourth, among the securities which the Company proposes to sell; but in no event shall the amount of securities of the selling Holders included in the offering be reduced below twenty percent (20%) of the total amount of securities included in such offering; provided, further, that in the event of the IPO, the number of shares held by the Holders and any other shareholder proposed to be included in the offering may be reduced to zero. For purposes of the preceding provisions 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 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.

        (b)   In connection with any offering pursuant to Section 1.4 hereof involving an underwriting of shares of the Company's capital stock, the Company shall not be required to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, 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 to be 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); provided, however, that the managing underwriter shall limit or exclude up to all of the securities of holders of capital stock of the Company as follows: (i) first, among securities requested to be included in such registration by any shareholder of the Company other than a Holder and otherwise eligible to be included in such registration, (ii) second, ratably among the Series B/C Registrable Securities requested by the Holders to be included in such registration and otherwise eligible to be included in such registration, and (iii) third, ratably among the Series E Registrable Securities requested by the

        Section 1.6    Obligations of the Company.    Whenever required under this ARTICLE I to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

        (f)    Use its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement and, if one is issued, promptly notify the Holders of the issuance of any such order and use its best efforts to obtain the withdrawal of any such order;

        (g)   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;

        (h)   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 Securities 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, in the light of the circumstances then existing, not misleading; and, as promptly as practicable thereafter, prepare and file with the SEC and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances then existing, not misleading;

        (i)    Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or quoted on the quotation system on which similar securities issued by the Company are then listed or quoted (or if the Common Stock is not yet listed or quoted, then on such exchange or quotation system as the selling Holders of Registrable Securities and the Company shall mutually agree);

        (j)    Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities not later than the effective date of such registration;

        (k)   Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this ARTICLE I, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this ARTICLE I, 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;

        (l)    Make available to each selling Holder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling Holder or underwriter (collectively, the "Inspectors"), upon request, all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to exercise their due diligence responsibility and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration statement, subject, in each case, to such confidentiality agreements as the Company shall reasonably request; and

        Section 1.7    Furnish Information.    It shall be a condition precedent to the obligations of the Company to take any action pursuant to this ARTICLE I 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 required to effect the registration of such Holder's Registrable Securities.

        Section 1.8    Expenses of Registration.    All Registration Expenses, as well as the reasonable fees and expenses of one counsel for the selling shareholders, incurred in connection with any registration, qualification or compliance pursuant to Section 1.2, Section 1.3 and Section 1.4 hereof shall be borne by the Company; provided, however, that if the Holders bear the Registration Expenses for any registration proceeding begun pursuant to Section 1.2 and subsequently withdrawn by the Holders registering shares therein, such registration proceeding shall not be counted as a requested registration pursuant to Section 1.2 hereof, except in the event that such withdrawal is based upon material adverse information relating to the Company that is different from the information known or available (upon request from the Company or otherwise) to the Holders requesting registration at the time of their request for registration under Section 1.2, in which event such registration shall not be treated as a counted registration for purposes of Section 1.2 hereof, even though the Holders do not bear the Registration Expenses for such registration. All Selling Expenses relating to securities so registered shall be borne by the Holders of such securities pro rata on the basis of the number of shares of securities so registered on their behalf.

        Section 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 ARTICLE I.

        Section 1.10    Indemnification.    In the event any Registrable Securities are included in a registration statement under this ARTICLE I:

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 or delayed), 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 Securities 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 Securities Act or the Exchange 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 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, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 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 Section 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 or delayed); provided, further, that in no event shall any indemnity under this Section 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

        Section 1.11    Reports Under Securities Exchange Act.    With a view to making available to the Holders the benefits of Rule 144, the Company agrees to:

        Section 1.12    Assignment of Registration Rights.    The rights to cause the Company to register Registrable Securities pursuant to this ARTICLE I may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (a) is a subsidiary, parent, member, affiliate, partner, limited partner, retired partner or shareholder of a Holder or (b) is a Holder's family member or a trust for the benefit of an individual Holder or such Holder's family members; provided, however that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (ii) 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 1.13 below; and (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. 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, however, 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 ARTICLE I.

        Section 1.13    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 seventy-five percent (75%) of the Series E Registrable Securities then outstanding, 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 hereunder, 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 such holder's securities will not reduce the amount of the Series E Registrable Securities which is included, (b) to make a demand registration which could result in such registration statement being declared effective prior to the earliest of the dates set forth in Section 1.2(a) hereunder, or (c) to obtain registration rights which are senior or pari passu to the registration rights granted to the Holders of Series E Registrable Securities hereunder.

        Section 1.14    "Market Stand-Off" Agreement; Additional Restrictions.    Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the later of (i) sixty (60) days prior to the effective date of the offering or (ii) the date notice of the offering is given to the Holder in accordance with Section 4.5 hereof, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days from the effective date of the IPO or ninety (90) days after the effective date of any follow-on offering) (a) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock held by it immediately prior to the date of the final prospectus, or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock held by it immediately prior to the date of the final prospectus, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The underwriters in connection with any such offering are intended third party beneficiaries of this Section 1.14 and

shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions and restrictive legends with respect to such securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. The foregoing provisions of this Section 1.14 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement and shall only be applicable to the Holders if all officers and directors and greater than five percent (5%) shareholders of the Company enter into similar agreements; provided, further, that if any officer or director that is subject to such "market stand-off agreement" is released from his restrictions to permit the sale of securities with a sale price of more than $250,000 prior to the end of its specified duration, then each Holder shall likewise be so released from such restrictions with respect to the same percentage of its securities and at the same time. The restrictions contained in this Section 1.14 shall terminate after the IPO with respect to any Holder who, together with its affiliates, beneficially owns less than 1% of the Company's Common Stock then outstanding (assuming conversion of all outstanding preferred stock held by such Holder and exercise of all vested warrants or options of such Holder to purchase capital stock of the Company).

        Section 1.15    Termination of Registration Rights.    No Holder shall be entitled to exercise any right provided for in this ARTICLE I (a) at any time after five (5) years following the consummation of the IPO, or (b) at any time after the IPO at which all Registrable Securities held by such Holder can be sold in compliance with Rule 144(k) promulgated under the Securities Act, or (c) with respect to any Registrable Securities that are then currently the subject of another registration statement that has been filed by the Company with the SEC under the Securities Act.

        Section 2.1    Information Rights.    The Company shall deliver to each Major Shareholder:

        Section 2.2    Inspection.    The Company shall permit each Major Shareholder, at such Major Shareholder'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 and during normal business hours as may be requested by such Major Shareholder.

        Section 2.3    Termination of Covenants.    The covenants set forth in this ARTICLE II shall terminate and be of no further force or effect upon the earlier of (a) the consummation of the IPO, or (b) the date the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act.

        Section 2.4    Investor Board Member Expenses.    The Company shall pay, in accordance with its standard reimbursement policy, for the reasonable out-of-pocket expenses incurred by the directors who are designated by Major Shareholders when attending meetings of the Board and its committees.

        Section 2.5    Indemnification of Directors.    The Bylaws of the Company shall, at all times require the Company to indemnify its directors to the full extent permitted by applicable law.

        Section 2.6    Directors' and Officers' Liability Insurance.    The Company shall maintain in full force and effect, Directors' and Officers' liability insurance in such amounts, with such coverages and with a carrier authorized to do business in California, as deemed appropriate by the Board.

        Section 2.7    Key Man Life Insurance    Unless the Board unanimously agrees otherwise, within sixty (60) days after the Closing, the Company shall obtain life insurance of at least $2 million, which proceeds are payable to the Company, on Eric Boden, the Company's Chief Executive Officer.

        Section 2.8    Confidential Information    Notwithstanding any other provision of this ARTICLE II, including but not limited to Section 2.1(i) and Section 2.2 hereof, the Company shall not be obligated (i) to provide information which the Company deems in good faith to be a trade secret or similar confidential information or (ii) to provide information to a Major Shareholder, or a representative of a Major Shareholder, who the Company reasonably believes is a competitor or a potential competitor of the Company. Notwithstanding the foregoing, in the case of clause (i) of the foregoing sentence, the Company shall provide a Major Shareholder with such trade secret or similar confidential information if such Major Shareholder executes and delivers to the Company a binding confidentiality agreement with respect to such information.

        Section 2.9    Notice of Certain Events.    

        Section 3.1    Right of Major Shareholders.    Subject to the terms and conditions specified in this ARTICLE III, the Company hereby grants to each Major Shareholder a right of first offer with respect to future sales or issuances by the Company of its New Securities (as defined herein). A Major Shareholder who chooses to exercise this right of first offer may designate as purchasers under such right itself or its partners or affiliates in such proportions as it deems appropriate.

        Section 3.2    Offer Procedures    Each time the Company proposes to offer any shares of New Securities, the Company shall first make an offering of such New Securities to each Major Shareholder in accordance with the following provisions:

        Section 3.3    New Securities.    For the purposes of this ARTICLE III, the term "New Securities" shall mean any equity securities of the Company, including any securities convertible, with or without consideration, into any equity securities of the Company, any option, warrant or right to subscribe for or purchase any equity securities of the Company, and any security carrying any such option, warrant or right, except the following: (i) securities issued to employees, officers, directors of, consultants or advisors to the Company pursuant to plans or other incentive arrangements or agreements approved by the Board; (ii) securities issued to financial institutions or lessors in connection with commercial credit arrangements, equipment financings or similar transactions approved by the Board or issued to strategic partners or in connection with business arrangements approved by the Board, including but not limited to warrants issued or issuable to Exult, Inc. and/or Citicorp Strategic Technologies Corp. (or their affiliates); (iii) securities issued as consideration (and not primarily for financing purposes) in connection with business combinations, acquisitions, mergers, asset purchase, other reorganization or similar transaction approved by the Board; (iv) securities issued pursuant to the conversion or exercise of convertible or exercisable securities outstanding on the date hereof; (v) securities issued in connection with the IPO; (vi) securities issued pursuant to a stock split, stock dividend or recapitalization with respect to the

outstanding capital stock of the Company; (vii) securities issued or issuable in connection with any anti-dilution protective rights set forth in the Company's Articles of Incorporation as amended; (viii) securities issued or issuable in connection with those certain convertible subordinated promissory notes dated December 12, 2002; (ix) securities issued or issuable in connection with that certain Convertible Subordinated Note and Warrant Purchase Agreement entered into by and among such holders and the Company in January 2002; or (x) shares of Series E Preferred Stock issued pursuant to the Purchase Agreement.

        Section 3.4    Termination.    The right set forth in this ARTICLE III shall terminate and be of no further force or effect upon the consummation of the IPO.

        Section 4.1    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 transferees 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.

        Section 4.2    Governing Law.    This Agreement shall be governed by and construed under the laws of the State of California, without giving effect to conflicts of laws principles.

        Section 4.3    Counterparts.    This Agreement may be executed in two or more counterparts, including counterparts transmitted by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

        Section 4.4    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.

        Section 4.5    Notices.    All notices and other communications hereunder shall be in writing and shall be deemed given to the party to be notified (a) upon personal delivery, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, and if not sent during normal business hours, then on the next business day, (c) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All such notices shall be sent to the parties at the address for each party set forth herein or beneath each party's name in Schedule I or Schedule II hereto (or at such other address for a party as shall be specified by like notice):

        Section 4.6    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.

        Section 4.7    Amendments and Waivers.    Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of (a) as to the Company, only by the Company, and (b) as to the Holders, by (i) the Holders of a majority of the Registrable Securities then outstanding and (ii) the Holders of at least seventy-five percent (75%) of the Series E Registrable Securities then outstanding; provided, however, that the seventy-five percent (75%) requirement set forth in the foregoing clause (ii) and in Section 1.13 may be amended by the holders of such percentage of the outstanding shares of the Series E Registrable Securities without the approval or consent of the Company or any other party to this Agreement. Notwithstanding the foregoing, (x) any amendment of this Agreement that disproportionately, materially and adversely affects the Founder's rights hereunder (other than to grant registration rights, including demand registration rights, to other parties, including rights that are senior to or on parity with the rights granted to the Founder) will also require the written consent of Founder and (y) any amendment of this Agreement which effects a change in the definition of the term "Major Shareholder" so as to cause a Major Shareholder to cease being a Major Shareholder after such change is effected will also require the written consent of the affected Major Shareholder. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company.

        Section 4.8    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.

        Section 4.9    Delays or Omissions.    No delay or omission to exercise any right, power or remedy accruing to any Holder, upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement or any waiver on the part of any Holder of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Holder, shall be cumulative and not alternative.

        Section 4.10    Aggregation of Stock.    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.

        Section 4.11    Entire Agreement.    This Agreement (including the Schedules hereto, if any), constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and supersedes any and all prior agreements relating to the subject matter hereof including, without limitation, the Prior Agreement.

        Section 4.12    Additional Investors.    In the event the Company issues additional shares of its Series E Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and such purchaser shall be deemed to be an "Investor" hereunder. Schedule II may be updated from time to time by the Company after the date hereof to reflect any subsequent Investors.

        1.    Amendment of 75% Requirement.    The term "seventy-five percent (75%)" contained in Section 1.13 and Section 4.7 of the Agreement shall, in each case, be deleted and replaced with the term "sixty percent (60%)".

        2.    Effect of Amendment.    All terms and provisions of the Agreement shall continue in full force and effect except as expressly modified by this Amendment. each reference in the Agreement (or in any and all instruments or documents provided for in the Agreement or delivered or to be delivered thereunder or in connection therewith) to "this Agreement," "hereunder," "hereof," or words of like import shall, except where the context otherwise requires, be deemed a reference to the Agreement as amended hereby.

        3.    Severability.    In the event that any provision of this Amendment is held to be illegal, invalid or unenforceable under applicable law, the remaining provision of this Amendment will remain in full force and effect and will not be effected by the illegal, invalid or unenforceable provision and will be interpreted so as to effect, as closely as possible, the intent of the parties hereto.

        4.    Governing Law.    This Amendment shall be governed by and construed under the laws of the state of California, without giving effect to conflicts of laws principles.

        5.    Counterparts.    This Amendment may be executed in two or more counterparts, including counterparts transmitted by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

        6.    Titles and Subtitles.    The titles and subtitles used in this Amendment are used for convenience only and are not to be considered in construing or interpreting this Amendment.

        1.    Amendment of Section 1.1(h).    Section 1.1(h) of the Agreement, which currently reads as follows:

        2.    Amendment of Section 1.1(u).    Section 1.1(u) of the Agreement, which currently reads as follows:

"Series E Registrable Securities" shall mean (i) shares of Common Stock issuable or issued upon conversion of the Series E Preferred Stock or Series E-1 Preferred Stock; (ii) shares

        3.    Amendment of Section 3.3.    Section 3.3 of the Agreement, which currently reads as follows:

        "New Securities. For the purposes of this ARTICLE III, the term "New Securities" shall mean any equity securities of the Company, including any securities convertible, with or without consideration, into any equity securities of the Company, any option, warrant or right to subscribe for or purchase any equity securities of the Company, and any security carrying any such option, warrant or right, except the following: (i) securities issued to employees, officers, directors of, consultants or advisors to the Company pursuant to plans or other incentive arrangements or agreements approved by the Board; (ii) securities issued to financial institutions or lessors in connection with commercial credit arrangements, equipment financings or similar transactions approved by the Board or issued to strategic partners or in connection with business arrangements approved by the Board, including but not limited to warrants issued or issuable to Exult, Inc. and/or Citicorp Strategic Technologies Corp. (or their affiliates); (iii) securities issued as consideration (and not primarily for financing purposes) in connection with business

        4.    Effect of Amendment.    All terms and provisions of the Agreement shall continue in full force and effect except as expressly modified by this Amendment. Each reference in the Agreement (or in any and all instruments or documents provided for in the Agreement or delivered or to be delivered thereunder or in connection therewith) to "this Agreement," "hereunder," "hereof," or words of like import shall, except where the context otherwise requires, be deemed a reference to the AGreement as amended hereby.

        5.    Severability.    In the event that any provision of this Amendment is held to be illegal, invalid or unenforceable under applicable law, the remaining provision of this Amendment will remain in full force and effect and will not be effected by the illegal, invalid or unenforceable provision and will be interpreted so as to effect, as closely as possible, the intent of the parties hereto.

        6.    Governing Law.    This Amendment shall be governed by and construed under the laws of the State of California, without giving effect to conflicts of laws principles.

        7.    Counterparts.    This Amendment may be executed in two or more counterparts, including counterparts transmitted by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

        8.    Titles and Subtitles.    The titles and subtitles used in this Amendment are used for convenience only and are not to be considered in construing or interpreting this Amendment.