Agreement - NetRatings Inc. and Nielsen Media Research Inc.
AGREEMENT
This Agreement (the "Agreement") is made as of November 9,
1999 by and between NetRatings, Inc., a Delaware corporation (the "Company") and
Nielsen Media Research, Inc., a Delaware corporation ("NMR").
W I T N E S S E T H
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WHEREAS, in connection with the purchase by NMR of shares of
Series C Preferred Stock of the Company pursuant to that certain Series C
Preferred Stock Purchase Agreement dated August 15, 1999, NMR was granted by the
Company (i) a common stock purchase warrant ("Warrant I") to purchase 1,106,109
shares of Common Stock, par value $.001 per share, of the Company ("Common
Stock"), with an exercise price equal to $3.60 per share, exercisable in whole
or in part from the earlier of January 1, 2000 and the effectiveness (the date
on which such effectiveness is declared by the Securities and Exchange
Commission is hereinafter referred to as the "Effective Date") of the
registration statement on Form S-1 relating to the initial public offering of
the Company's Common Stock (the "IPO"), until December 31, 2001, and (ii) a
common stock purchase warrant (together with Warrant I, the "Warrants") to
purchase 12,000,000 shares of Common Stock with an exercise price equal to the
lower of $6.00 per share or 60% of the price at which the Company's Common Stock
is sold in the IPO (in the aggregate for the purchase of all shares under the
Warrants, the "Total Exercise Amount") exercisable in whole or in part from the
earlier of January 1, 2002 and the Effective Date, until December 31, 2004
(subject to adjustment of the Warrant shares and Exercise Price to give effect
to a contemplated 1-for-2 reverse stock split by the Company);
WHEREAS, pursuant to that certain Second Restated Rights
Agreement and Addendum No. 1 to Second Restated Rights Agreement each dated as
of September 22, 1999 by and among the Company, NMR and certain stockholders of
the Company set forth therein (which amended and restated the Restated Rights
Agreement and Addendum No. 1 to Restated Rights Agreement dated August 15,
1999)(collectively, the "Rights Agreement"), NMR has the right (the "Top-Off
Right"), for so long as it owns at least 5.0% of the issued and outstanding
Common Stock on a fully-diluted basis (as defined in the Rights Agreement), to
purchase from the Company, either as registered securities in connection with
the IPO or in a private placement occurring concurrently therewith, that number
of additional shares of Common Stock as may be necessary to cause the number of
shares of Common Stock beneficially owned by NMR (including all shares
underlying the Warrants) to increase to an amount which, after giving effect to
the IPO, is equal to but not greater than 54.0% of the issued and outstanding
shares of Common Stock on a fully-diluted basis upon the closing of the IPO at a
price per share equal to the offering price in the IPO (the sum of the total
cost of the exercise of the Top-Off Right as modified by Section 1 and the Total
Exercise Amount as defined in the Addendum No. 1 to the Rights Agreement, the
"Purchase Price");
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WHEREAS, on October 28, 1999, the Company filed with the
Securities and Exchange Commission an amendment to its registration statement on
Form S-1 which contemplates the offering of 4,000,000 shares of Common Stock and
states an expected offering price per share of between $12.00 and $14.00 (the
registration statement and all amendments thereto, including amendments after
the date of this Agreement, collectively "Form S-1");
WHEREAS, pursuant to Section 2.1 of Addendum No. 1 to the
Rights Agreement, (i) on September 26, 1999, the Company notified NMR of its
intention to file a Company-IPO and (ii) on October 26, 1999, NMR notified the
Company that it intended to exercise its Top-Off Right (each, a "Top-Off Notice"
and collectively, the "Top-Off Notices");
WHEREAS, the Company and NMR desire to enter into this
Agreement to provide for (i) the commitment by NMR to exercise the Warrants and
the Top-Off Right with certain changes upon the later to occur of (A) the
closing of the IPO and (B) the date on which all filing requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR") have
been satisfied including, without limitation, the expiration or early
termination of all applicable waiting periods thereunder (such later date, the
"Control Date"), such that on the Control Date, NMR shall own greater than a
majority of the issued and outstanding shares of Common Stock on a Fully Diluted
Basis as defined below and (ii) the expansion of the Board of Directors of the
Company from six members to eleven members through the creation of five new
directorships on the Board and the filling of such newly created directorships
with designees of NMR, such that, upon the Control Date, NMR shall control a
majority (rounded to the next highest whole number) of the seats on the Board
(the "Board Expansion") ; and
WHEREAS, the Board Expansion may be accomplished by action of
the Company's Board of Directors without shareholder or any other approval;
NOW THEREFORE, in consideration of the premises, mutual
covenants and terms hereof, and for other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. COMMITMENT BY NMR. Subject to the simultaneous fulfillment
by the Company of its obligations set forth below in Section 2 (a), NMR hereby
agrees to exercise the Warrants in full and the Top-Off Right in accordance with
their respective terms (subject to the provisions hereof) and pay the Purchase
Price (whether or not the offering price is within the proposed price range of
$12 to $14) such that NMR shall own at least 52% of the Company's issued and
outstanding shares of Common Stock on a Fully Diluted Basis (as defined below)
determined as of the closing date of the IPO but may purchase sufficient
additional shares of Common Stock at the final IPO offering price to own at
least a majority of the Company's issued and outstanding shares of Common Stock
on a Fully Diluted Basis on the Control Date, but in no case more than 54% of
the issued and outstanding shares of Common Stock of the Company on a Fully
Diluted Basis on the closing date of the IPO, and to pay to the Company, in
immediately available funds, the Purchase Price upon the Control Date.
Notwithstanding the foregoing, NMR shall no longer be obligated to exercise the
Warrants and the Top-Off Right and to pay the Purchase Price hereunder if (i)
the Control Date has not occurred prior to February 1, 2000 or
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(ii) the number of shares outstanding upon the closing of the IPO or on the
Control Date on a Fully Diluted Basis is greater than indicated in the Form
S-1 in its final form; except for employee stock options authorized by or
granted by the Company between the closing date of the IPO and the Control
Date to acquire up to 1,000,000 shares of Common Stock pursuant to the
Company's 1998 Stock Plan as amended. "Fully Diluted Basis" shall mean the
assumption that all options, warrants or other convertible securities or
instruments or other rights to acquire Common Stock or any other existing or
future classes of capital stock have been exercised or converted, as
applicable, in full, regardless of whether any such options, warrants,
convertible securities or instruments or other rights are then vested or
exercisable or convertible in accordance with their terms.
2. EXPANSION OF THE BOARD; ISSUANCE OF ADDITIONAL SHARES. (a)
Subject to the fulfillment by NMR of its obligations set forth above in Section
1, the Company hereby agrees to take or cause to be taken , prior to the closing
date of the IPO, all action necessary to increase the size of the Board from six
members to eleven members and to cause six members of the Board to be the
designees of NMR whose names are set forth on SCHEDULE I attached hereto (the
"NMR Designees"), such action to be contingent and effective upon the IPO and
the Control Date occurring.
(b) The Company agrees that, commencing on the closing date of
the IPO until the Control Date, it shall not issue additional shares of Common
Stock (or securities convertible or exercisable into Common Stock) except for
employee stock options authorized by or granted by the Company between the
closing date of the IPO and the Control Date to acquire up to 1,000,000 shares
of Common Stock pursuant to the Company's 1998 Stock Plan as amended.
3. FORM S-1. Upon execution and delivery of this Agreement by
each of NMR and the Company, the Company agrees to cause the Form S-1 to be
amended to include appropriate disclosure of this Agreement and all relevant
information concerning the NMR Designees as may be required under the Securities
Act of 1933 and the rules and regulations promulgated thereunder.
4. ADDITIONAL INFORMATION. Each party hereby agrees to provide
the other with such information as it may reasonably request in order to fulfill
its obligations hereunder and to take such additional action as may be required
in connection herewith.
5. CONSENT BY NMR TO INCREASE IN BOARD. NMR hereby consents to
an increase in the size of the Board of the Company in accordance with the terms
and conditions hereof, as required pursuant to Section 2.2(a) of Addendum No. 1
to Second Restated Stockholders Agreement of the Company dated September 22,
1999.
6. TOP-OFF NOTICES. Each of the Company and NMR acknowledges
and agrees that the Top-Off Notice given by the other party was validly and
timely given in accordance with the Rights Agreement and waives any right to
challenge the validity or timeliness thereof. The parties further agree that
NMR's Top-Off Notice is superseded by this Agreement, and that this Agreement
shall constitute a valid and timely Top-Off Notice of NMR, with effect as if
given on October 26, 1999. The Company waives its rights under the Top-Off Right
in the Rights
<PAGE>
Agreement to have NMR purchase 54% of the shares of Common Stock on a Fully
Diluted Basis upon the closing of an IPO.
7. HSR FILING. NMR and the Company agree to use their
reasonable best efforts to promptly make any required filings under HSR and to
respond promptly to any request for additional information from the agency
handling the HSR filing.
8. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California without giving effect to the
conflicts of laws principles thereof.
9. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties to this Agreement.
10. ENTIRE AGREEMENT; AMENDMENT. Except for the Rights
Agreement and Warrants which it modifies, this Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and supersedes all prior agreements and merges all prior
discussions, negotiations, proposals and offers (written or oral) between them.
Except as expressly provided in this Agreement, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by both parties.
11. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and both of which together shall constitute one
instrument.
12. TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
The foregoing Agreement is hereby executed as of the date
first above written.
NIELSEN MEDIA RESEARCH, INC. NETRATINGS, INC.
By: /s/ Stephen J. Boatti By: /s/ David J. Toth
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Name: Stephen J. Boatti Name: David J. Toth
Title: Senior Vice President, Chief Title: President and CEO
Legal Officer & Secretary
By: /s/ David A. Norman
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Name: David A. Norman
Title: Chairman of the Board